FEDERATED INSURANCE SERIES, 497, 1998-04-27

FEDERATED INSURANCE SERIES
497, 1998-04-27

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Federated American Leaders Fund II

(A Portfolio of Federated Insurance Series)

PROSPECTUS

This prospectus offers shares of Federated American Leaders Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 23,
1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS FUNDING VEHICLES FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR SUCH
CONTRACTS.

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objectives 2
Investment Policies 2
Investment Limitations 5
Net Asset Value 5
Investing in the Fund 5
Purchases and Redemptions 5
What Shares Cost 5
Dividends 5
Fund Information 5
Management of the Fund 5
Distribution of Shares 6
Administration of the Fund 7
Brokerage Transactions 7
Shareholder Information 7
Voting Rights 7
Tax Information 7
Federal Taxes 7
State and Local Taxes 8
Performance Information 8

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated February 6, 1998, on the Fund's
financial statements for the year ended December 31, 1997, and on the following
table for the periods presented, is included in the Fund's Annual Report, which
is herein incorporated by reference. This table should read in conjunction with
the Fund's financial statements and notes thereto, contained in the Fund's
Annual Report, which may be obtained free of charge.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.26 $12.80 $ 9.74 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.19 0.20 0.19
Net realized and unrealized gain (loss) on investments 4.64 2.54 3.06 (0.26)
Total from investment operations 4.83 2.73 3.26 (0.07)
LESS DISTRIBUTIONS
Distributions from net investment income (0.10) (0.18) (0.19) (0.19)
Distributions in excess of net investment income(b) -- -- (0.01) --
Distributions from net realized gain on investments (0.36) (0.09) -- --
Total distributions (0.46) (0.27) (0.20) (0.19)
NET ASSET VALUE, END OF PERIOD $19.63 $15.26 $12.80 $ 9.74
TOTAL RETURN(C) 32.34% 21.58% 33.71% (0.70%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.85% 0.85% 0.54%*
Net investment income 1.18% 1.54% 2.03% 2.58%*
Expense waiver(d) 0.09% 0.22% 1.36% 25.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $305,796 $142,216 $48,514 $2,400
Average commission rate paid(e) $0.0499 $0.0012 -- --
Portfolio turnover 56% 90% 43% 32%
</TABLE>
* Computed on an annualized basis.

(a) Reflects operations for the period from February 1, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9, 1993
(start of business) to January 31, 1994, the Fund had no investment activity.

(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principals. These distributions do
not represent a return of capital for federal income tax purposes.

(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED DECEMBER 31, 1997, WHICH CAN BE OBTAINED FREE OF
CHARGE.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust under a Declaration
of Trust dated September 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Board of Trustees
("Trustees") have not established separate classes of shares.

Shares of the Fund are sold only to insurance companies as funding vehicles for
variable annuity contracts and variable life insurance policies issued by the
insurance companies. Shares of the Fund are sold at net asset value as described
in the section entitled "What Shares Cost." Shares of the Fund are redeemed at
net asset value.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES

The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies described
in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue-chip"
companies. "Blue-chip" companies generally are top-quality, established growth
companies which, in the opinion of the investment adviser, meet one or more of
the following criteria:

* industry leader with proven management capabilities; * historical and
future earnings growth rate of approximately 10%
compounded annually;
* strong balance sheet with pension liabilities funded; * products with brand
recognition and consumer acceptance; * growing consumer-based demand with
limited government sales; * ability to meet social, political, and
environmental problems; * vigorous research effort with continuing new
product flow; * low external capital requirements; and * not an import
competitive company but possessing international
capabilities.

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Trustees without the approval of shareholders. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS

The Fund's investment approach is based on the conviction that over the long
term the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of blue-chip
companies. Given these long-term investment horizons, the Fund will attempt to
hold its portfolio securities throughout market cycles.

COMMON STOCKS

The Fund invests primarily in common stocks of blue-chip companies selected by
the Fund's investment adviser based on the criteria set forth above and
traditional research techniques and technical factors, including assessment of
earnings and dividend growth prospects and of the risk and volatility of the
company's industry. Other factors, such as product position or market share,
will also be considered by the Fund's investment adviser.

AMERICAN DEPOSITARY RECEIPTS

The Fund may invest in American Depositary Receipts ("ADRs") of
foreign-domiciled blue-chip companies. ADRs are trust receipts issued by
U.S. banks or trust companies representing ownership interests in the equity
securities of these companies. ADRs are U.S. dollar-denominated and traded
on U.S. securities exchanges or over-the-counter. The value of ADRs could be
affected by changes in foreign currency exchange rates.

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Con-vertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as
DECS(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock
when issued as a debt security), LYONS(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS(Preferred Equity Redemption Cumulative Stock, an
equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding convertible securities rated below investment grade by a nationally
recognized statistical rating organization (NRSRO) or in the Fund holding such
securities where they have acquired a rating below investment grade after the
Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

REAL ESTATE INVESTMENT TRUSTS

The Fund may purchase interests in real estate investment trusts. Risks
associated with real estate investments include the fact that equity and
mortgage real estate investment trusts are dependent upon management skill and
are not diversified, and are, therefore, subject to the risk of financing single
projects or unlimited number of projects. They are also subject to heavy cash
flow dependency, defaults by borrowers, and self-liquidation. Additionally,
equity real estate investment trusts may be affected by any changes in the value
of the underlying property owned by the trusts, and mortgage real estate
investment trusts may be affected by the quality of any credit extended. The
investment adviser seeks to mitigate these risks by selecting real estate
investment trusts diversified by sector (shopping malls, apartment building
complexes, and health care facilities) and geographic location.

BANK INSTRUMENTS

Primarily to manage short-term cash, the Fund may also invest in certificates of
deposit, demand and time deposits, bankers' acceptances, deposit notes, and
other instruments of domestic and foreign banks and other deposit institutions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.

REPURCHASE AGREEMENTS

The Fund will engage in repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/ dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restriction on resale under federal securities
law. Under criteria established by the Trustees, certain restricted securities
are determined to be liquid. To the extent that restricted securities are not
determined to be liquid, the Fund will limit their purchase together with other
illiquid securities including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after notice, and
over-the-counter options to 15% of its net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or long-term basis, or both, up to one-third of the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. This is a fundamental policy which may not be changed without the
approval of shareholders. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has determined
are creditworthy under guidelines established by the Trustees, and will receive
collateral in the form of cash or U.S. government securities equal to at least
100% of the value of the portfolio securities loaned at all times.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete the transaction may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

TEMPORARY INVESTMENTS

For defensive purposes only, the Fund may also invest temporarily in cash and
cash items during times of unusual market conditions and to maintain liquidity.
Cash items may include short-term obligations such as:

* commercial paper rated A-1 or A-2 by Standard & Poor's, Prime-1 or Prime-2
by Moody's Investors Service, Inc., or F-1 or F-2 by Fitch IBCA, Inc. A
description of the rating categories is contained in the Appendix to the
Statement of Additional Information;
* securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities;
and
* repurchase agreements.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. If applicable, the Fund may be limited in its ability to engage in
such investments and to manage its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

The net asset value per share of the Fund fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets of the
Fund, less liabilities, by the number of shares outstanding.

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations,
resulting from mixed funding or shared funding, the Trustees will closely
monitor the operation of mixed funding and shared funding and will consider
appropriate action to avoid material conflicts and take appropriate action in
response to any material conflicts which occur. Such action could result in one
or more participating insurance companies withdrawing their investment in the
Fund.

Shares of the Fund are purchased or redeemed on behalf of participating
insurance companies at the next computed net asset value after an order is
received on days on which the New York Stock Exchange is open.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New Year's
Day, Martin Luther King, Jr, Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

Purchase orders from separate accounts investing in the Fund which are received
by the insurance companies by 4:00 p.m. (Eastern time) will be computed at the
net asset value of the Fund determined on that day, as long as such purchase
orders are received by the Fund in proper form and in accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business day and as long as
federal funds in the amount of such orders are received by the Fund on the next
business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

Shares of the Fund will begin earning dividends if owned on the applicable
record date. Dividends of the Fund are automatically reinvested in additional
shares of the Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the Trust's
powers except those reserved for the shareholders. The Executive Committee of
the Board of Trustees handles the Board's responsibilities between meetings of
the Board.

INVESTMENT ADVISER

Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Advisers, the Fund's investment adviser,
subject to direction by the Trustees. The adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of these codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES

The Fund's adviser receives an annual investment advisory fee equal to 0.75% of
the Fund's average daily net assets. The adviser may voluntarily choose to waive
a portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at any
time at its sole discretion.

ADVISER'S BACKGROUND

Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through approximately 4,000 financial institutions
nationwide.

Scott B. Schermerhorn has been a portfolio manager of the Fund since July
1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice
President of the Fund's investment adviser. From 1990 through 1996, Mr.
Schermerhorn was a Senior Vice President and Senior Investment Officer at J.
W. Seligman & Co., Inc. Mr. Schermerhorn received his M.B.A. in Finance and
International Business from Seton Hall University.

Michael P. Donnelly has been a portfolio manager of the Fund since April
1997. Mr. Donnelly joined Federated in 1989 as an Investment Analyst and has
been a Vice President of the Fund's investment adviser since 1994. He served
as an Assistant Vice President of the Fund's investment adviser from 1992 to
1994. Mr. Donnelly is a Chartered Financial Analyst and received his M.B.A.
from the University of Virginia.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a
number of investment companies. Federated Securities Corp. is a subsidiary
of Federated Investors.

SHAREHOLDER SERVICES

The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
institutions to perform shareholder services. Institutions will receive fees
based upon shares owned by their clients or customers. The schedules of such
fees and the basis upon which such fees will be paid will be determined from
time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp., from its own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance may be predicated upon the
amount of shares the financial institution sells or may sell and/or upon the
type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund at an annual rate which
relates to the average aggregate daily net assets of all funds advised by
affiliates of Federated Investors as specified below:

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, Aetna Insurance Co. of America, Hartford, CT, and
Aetna Life Insurance & Annuity Co. Central Valuation Unit, Hartford, CT, owned
approximately 36.56% and 35.97%, respectively of the voting securities of the
Fund, and therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders. Aetna Insurance Company of America and Aetna Life Insurance &
Annuity Co. are owned by Aetna Inc.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.

TAX INFORMATION

FEDERAL TAXES

The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.

The Fund intends to comply with the variable asset diversification regulations
which are described earlier in this prospectus. If the Fund fails to comply with
these regulations, contracts invested in the Fund shall not be treated as
annuity, endowment, or life insurance contracts under the Internal Revenue Code.

Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding. The yield does not necessarily
reflect income actually earned by the Fund and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.

Performance information will not reflect the charges and expenses of a variable
annuity or variable life insurance contract. Because shares of the Fund can only
be purchased by a separate account of an insurance company offering such a
contract, you should review the performance figures of the contract in which you
are invested, which performance figures will accompany any advertisement of the
Fund's performance.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

[Graphic]

Federated Investors
Federated American Leaders Fund II
(A Portfolio of Federated Insurance Series)

PROSPECTUS

APRIL 23, 1998

A DIVERSIFIED PORTFOLIO OF FEDERATED INSURANCE SERIES, AN
OPEN-END MANAGEMENT INVESTMENT COMPANY

FEDERATED
INSURANCE
SERIES
FEDERATED AMERICAN LEADERS FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Advisers
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor

1-800-341-7400

www.federatedinvestors.com

Cusip 313916405
3113010A (4/98)

[Graphic]

FEDERATED AMERICAN LEADERS FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated American Leaders Fund II (the "Fund"), a portfolio of Federated
Insurance Series (the "Trust") dated April 23, 1998. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

[Graphic]
Federated Investors

Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 313916405
3113010B (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1
INVESTMENT OBJECTIVES AND POLICIES 1
Types of Investments 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Investing in Securities of Other Investment Companies 2
Repurchase Agreements 2
Reverse Repurchase Agreements 3
Restricted and Illiquid Securities 3
Portfolio Turnover 3
INVESTMENT LIMITATIONS 3
Selling Short and Buying on Margin 3
Issuing Senior Securities and Borrowing Monsy 3
Pledging Assets 3
Concentration of Investments 3
Investing in Commodities 4
Investing in Real Estate 4
Lending Cash or Securities 4
Underwriting 4
Diversification of Investments 4
Investing in Restricted and Illiquid Securities 4
FEDERATED INSURANCE SERIES MANAGEMENT 5
Fund Ownership 8
Trustee Compensation 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
Adviser to the Fund 9
Advisory Fees 10
BROKERAGE TRANSACTIONS 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 10
Transfer Agent 10
Independent Auditors 10
PURCHASING SHARES 11
SHAREHOLDER SERVICES 11
DETERMINING NET ASSET VALUE 11
Determining Market Value of Securities 11
MASSACHUSETTS PARTNERSHIP LAW 11
TAX STATUS 12
The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12
YIELD 12
PERFORMANCE COMPARISONS 12
Economic and Market Information 13
ABOUT FEDERATED INVESTORS 13
Mutual Fund Market 14
Institutional Clients 14
Bank Marketing 14
Broker/Dealers and Broker/Dealer Subsidiaries 14
FINANCIAL STATEMENTS 14
APPENDIX 15

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from Equity Growth and Income Fund to Federated American
Leaders Fund II. The Declaration of Trust permits the Trust to offer separate
series of shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in separate
classes. As of the date of this prospectus, the Trustees have not established
separate classes of shares.

INVESTMENT OBJECTIVES AND POLICIES

TYPES OF INVESTMENTS

The Fund invests, under normal circumstances, at least 65% of its total assets
in common stock of "blue-chip" companies, as defined in the prospectus. The Fund
may also invest in other securities of these companies, U.S. government
securities, repurchase agreements, and bank instruments. The following
supplements the discussion of acceptable investments in the prospectus.

CONVERTIBLE SECURITIES

DECS, or similar instruments marketed under different names, offer a substantial
dividend advantage with the possibility of unlimited upside potential if the
price of the underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the price of the
common stock at the time of maturity. DECS contain two call options at different
strike prices. The DECS participate with the common stock up to the first call
price. They are effectively capped at that point unless the common stock rises
above a second price point, at which time they participate with unlimited upside
potential.

PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited to
a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises.

WARRANTS

Warrants are basically options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specific period of time. Warrants may have a life ranging
from less than a year to twenty years or may be perpetual. However, most
warrants have expiration dates after which they are worthless. In addition, if
the market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. The percentage increase
or decrease in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.

U.S. GOVERNMENT OBLIGATIONS

The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or guaranteed
by the U.S. government agencies or instrumentalities. These securities are
backed by:

* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

* Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;
* Federal Home Loan Banks; * Federal Home Loan Mortgage Corporation; *
Federal National Mortgage Association; and * Student Loan Marketing
Association.

BANK INSTRUMENTS

The Fund only invests in bank instruments (as defined in the prospectus) either
issued by an institution having capital, surplus, and undivided profits over
$100 million or insured by the Bank Insurance Fund (BIF) or the Savings
Association Insurance Fund (SAIF), both of which are administered by the Federal
Deposit Insurance Corporation. Bank instruments may include Eurodollar
Certificates of Deposit, Yankee Certificates of Deposit, and Eurodollar Time
Deposits. Institutions issuing Eurodollar instruments are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
recordkeeping and the public availability of information.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to broker/dealers,
banks, or other institutional borrowers of securities. The collateral received
when the Fund lends portfolio securities must be valued daily and, should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination at the option of the Fund or the
borrower. The Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or equivalent collateral to the borrower or placing broker. The Fund
does not have the right to vote securities on loan, but would terminate the loan
and regain the right to vote if that were considered important with respect to
the investment.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

REPURCHASE AGREEMENTS

The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase agreements,
a court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.

RESTRICTED AND ILLIQUID SECURITIES

The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:

* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
* dealer undertakings to make a market in the security; and * the nature of
the security and the nature of the marketplace trades.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. Any such trading will increase the Fund's portfolio turnover rate and
transaction costs. The adviser to the Fund does not anticipate that portfolio
turnover will result in adverse tax consequences.

For the fiscal years ended December 31, 1997 and 1996, the portfolio turnover
rates for the Fund were 56% and 90%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements as a temporary, extraordinary,
or emergency measure to facilitate management of the portfolio by enabling the
Fund to meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous, and then only in amounts not in
excess of one-third of the value of its total assets; provided that, while
borrowings and reverse repurchase agreements outstanding exceed 5% of the Fund's
total assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25% or
more of its total assets would be invested in any one industry. However, the
Fund may at any time invest 25% or more of its total assets in cash or cash
items and securities issued and/or guaranteed by the U.S. government, its
agencies, or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, including limited partnership
interests in real estate, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in securities
secured by real estate or interests in real estate.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from purchasing
or holding corporate or U.S. government bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted by the Fund's
investment objectives and policies or the Trust's Declaration of Trust.

UNDERWRITING

The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objectives, policies, and
limitations.

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities issued
and/or guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) if, as a result, more
than 5% of its total assets would be invested in the securities of that issuer.
Also, the Fund will not purchase more than 10% of any class of the outstanding
voting securities of any one issuer. For these purposes, the Fund considers
common stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including, among others, repurchase agreements providing
for settlement more than seven days after notice, and certain restricted
securities not determined to be liquid under criteria established by the
Trustees.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value of total or net assets will not result in a violation
of such restriction.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Director, Member of Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director or
Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A. and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board, and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp., and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Insurance Company of America,
Hartford, CT, owned approximately 6,411,589 shares (36.56%); Aetna Life
Insurance & Annuity Co., Hartford, CT, owned approximately 6,308,109 shares
(35.97%); Life of Virginia, Richmond, VA, owned approximately 2,440,741 shares
(13.92%); and Great-West Life & Annuity Insurance Co., Englewood, CO, owned
approximately 1,200,740 shares (6.85%).

TRUSTEE COMPENSATION

AGGREGATE

NAME, COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID

TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies
in the Fund Complex

Thomas G. Bigley $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John T. Conroy, Jr. $292.28 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Nicholas P. Constantakis++ $0 $0 for the Trust and
Trustee 34 other investment companies
in the Fund Complex

William J. Copeland $292.28 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 18 other investment companies
in the Fund Complex

James E. Dowd $292.28 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Lawrence D. Ellis, M.D. $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Edward L. Flaherty, Jr. $292.28 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Peter E. Madden $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John E. Murray, Jr. $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Wesley W. Posvar $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Marjorie P. Smuts $265.66 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

++ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not receive any fees as of the fiscal year end of the Trust.

TRUSTEE LIABILITY

The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned
by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue.

The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1997, 1996, and 1995, the adviser earned
advisory fees of $1,671,330, $693,045, and $142,579, respectively, of which
$198,839, $203,603, and $142,579, respectively, were voluntarily waived.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended December 31, 1997, 1996, and 1995, the Fund paid
$226,100, $234,623, and $49,713, respectively, in brokerage commissions on
brokerage transactions.

Although investment decisions for the Fund are made independently from those of
any other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
December 31, 1997, 1996, and 1995, the Administrators earned $169,740, $125,000,
and $125,000, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.

TRANSFER AGENT

Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

Shares of the Fund are sold at their net asset value without a sales charge on
days the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "Purchases
and Redemptions" and "What Shares Cost."

SHAREHOLDER SERVICES

This arrangement permits the payment of fees to Federated Shareholder Services
to cause services to be provided which are necessary for the maintenance of
shareholder accounts and to encourage personal services to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include but are not limited to
providing office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.

By adopting the Shareholder Services Agreement, the Trustees expect that the
Fund will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

The Shareholder Services Agreement was not in effect in the Fund's fiscal year
ended December 31, 1997.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:

* for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;
* in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available; otherwise, as determined by an
independent pricing service;
* for unlisted equity securities, the latest mean prices; * for short-term
obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
* for all other securities, at fair value as determined in good faith by
the Trustees.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

TAX STATUS

THE FUND'S TAX STATUS

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

The Fund's average annual total returns for the one-year period ended December
31, 1997, and for the period from February 1, 1994 (date of initial public
investment) to December 31, 1997, were 32.34% and 21.54%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1997, was
1.29%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This value
is then annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a twelve month period and is reinvested every six months. The yield
does not necessarily reflect income actually earned by the Fund because of
certain adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. Also, the yield does not
reflect the charges and expenses of an insurance contract. You should review the
performance figures for your insurance contract, which figures reflect the
applicable charges and expenses of the contract. Such performance figures will
accompany any advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in Fund
expenses; and * the relative amount of the Fund's cash flow.

The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

* DOW JONES INDUSTRIAL AVERAGE, is an unmanaged index representing share
prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is cited
as a principal indicator of market conditions.

* STANDARD & POOR'S ("S&P") DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and financial
and public utility companies, can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. In
addition, the S&P index assumes reinvestment of all dividends paid by
stocks listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in the S&P figures.

* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.

Advertisements and sales literature for the Fund may quote total returns which
are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.

Advertising and other promotional literature may include charts, graphs, and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.

In the equity sector, Federated Investors has more than 27 years' experience. As
of December 31, 1997, Federated managed 29 equity funds totaling approximately
$11.7 billion in assets across growth, value, equity income, international,
index, and sector (i.e. utility) styles. Federated Investors' value-oriented
management style combines quantitative and qualitative analysis and features a
structured, computer-assisted composite modeling system that was developed in
the 1970s.

J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of approximately 900 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

BANK MARKETING

Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwidewe have over 2,200 broker/dealer and bank broker/dealer relationships
across the country -- supported by more wholesalers than any other mutual fund
distributor. Federated Investors' service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31, 1997, are
incorporated herein by reference to the Annual Report of the Fund dated December
31, 1997 (File Nos. 33-69268 and 811-8042). A copy of the Report may be obtained
without charge by contacting the Fund.

* Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

FITCH IBCA, INC. ("FITCH"), LONG-TERM DEBT RATINGS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

NR--NR indicates that Fitch does not rate the specific issue.

Plus (+) or Minus (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

* Leading market positions in well established industries.
* High rates of return on funds employed.
* Conservative capitalization structure with moderated reliance on debt
and ample asset protection.
* Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
* Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

FITCH IBCA, INC., COMMERCIAL PAPER RATINGS

F-1--(Highest Grade) Commercial paper assigned this rating is regarded as having
the strongest degree of assurance for timely payment.

F-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

FEDERATED UTILITY FUND II

(A Portfolio of Federated Insurance Series)

PROSPECTUS

This prospectus offers shares of Federated Utility Fund II (the "Fund"), which
is a diversified investment portfolio in the Federated Insurance Series (the
"Trust"), an open-end, diversified management investment company. The Fund
invests in equity and debt securities of utility companies to achieve high
current income and moderate capital appreciation. Shares of the Fund may be sold
only to separate accounts of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by the insurance companies which provide for
investment in the Fund. Keep this prospectus for future reference.

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Limitations 5
Net Asset Value 6
Investing in the Fund 6
Purchases and Redemptions 6
What Shares Cost 6
Dividends 6
Fund Information 6
Management of the Fund 6
Distribution of Fund Shares 8
Administration of the Fund 8
Brokerage Transactions 8
Shareholder Information 8
Voting Rights 8
Tax Information Inside Back Cover
Federal Taxes Inside Back Cover
State and Local Taxes Inside Back Cover
Performance Information Inside Back Cover

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated February 6, 1998, on the Fund's
financial statements for the year ended December 31, 1997, and on the following
table for the periods presented, is included in the Fund's Annual Report, which
is herein incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, contained in the Fund's
Annual Report, which may be obtained free of charge.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.81 $11.03 $ 9.29 $ 9.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.40 0.42 0.45 0.34
Net realized and unrealized gain (loss) on investments and 2.62 0.82 1.74 (0.19)
foreign currency
Total from investment operations 3.02 1.24 2.19 0.15
LESS DISTRIBUTIONS
Distributions from net investment income (0.28) (0.41) (0.45) (0.34)
Distributions from net realized gain on investments and foreign (0.26) (0.05) -- --
currency transactions
Total distributions (0.54) (0.46) (0.45) (0.34)
NET ASSET VALUE, END OF PERIOD $14.29 $11.81 $11.03 $ 9.29
TOTAL RETURN(B) 26.63% 11.56% 24.18% 1.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.85% 0.85% 0.60%*
Net investment income 3.41% 3.92% 4.62% 4.77%*
Expense waiver/reimbursement(c) 0.27% 0.51% 2.24% 54.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $104,462 $63,558 $29,679 $974
Average commission rate paid(d) $0.0207 $0.0402 -- --
Portfolio turnover 95% 63% 62% 73%
</TABLE>
* Computed on an annualized basis.

(a) Reflects operations for the period from April 14, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9, 1993
(start of business) to April 13, 1994, net investment income was distributed to
the Fund's adviser.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated December 31, 1997, which can be obtained free of charge.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Board of Trustees
(the "Trustees") have not established separate classes of shares.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to achieve high current income and
moderate capital appreciation. The investment objective cannot be changed
without approval of shareholders. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
policies described in this prospectus.

INVESTMENT POLICIES

The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of equity and debt securities of
utility companies. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS

The Fund's investment approach is based on the conviction that over the long
term, the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of utility
companies. The Fund intends to achieve its investment objective by investing in
equity and debt securities of utility companies that produce, transmit, or
distribute gas and electric energy as well as those companies that provide
communications facilities, such as telephone and telegraph companies. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities of utility companies. The prices of fixed income securities
fluctuate inversely to the direction of interest rates.

COMMON STOCKS

The Fund invests primarily in common stocks of utility companies selected by the
Fund's investment adviser on the basis of traditional research techniques,
including assessment of earnings and dividend growth prospects and of the risk
and volatility of the company's industry. However, other factors, such as
product position, market share, or profitability will also be considered by the
Fund's investment adviser.

AMERICAN DEPOSITARY RECEIPTS

The Fund may purchase American Depositary Receipts ("ADRs") issued by U.S. banks
as a substitute for direct ownership of securities of foreign companies in the
utilities industry. ADRs are traded in the United States on stock exchanges and
in the over-the-counter markets like stocks of domestic companies.

SECURITIES OF FOREIGN ISSUERS

The Fund may invest in the securities of foreign issuers which are freely traded
on United States securities exchanges or in the over-the-counter market in the
form of depositary receipts as well as securities of foreign issuers that trade
on foreign stock exchanges. Securities of a foreign issuer may present greater
risks in the form of nationalization, confiscation, domestic marketability, or
other national or international restrictions. As a matter of practice, the Fund
will not invest in the securities of a foreign issuer if any such risk appears
to the investment adviser to be substantial.

Investing in non-U.S. securities carries substantial risks in addition to those
associated with domestic investments. In an attempt to reduce some of these
risks, the Fund diversifies its investments broadly among foreign countries,
including both developed and developing countries.

The Fund will take advantage of the unusual opportunities for higher returns
available from investing in developing countries and may invest in the utility
and other securities of such countries. These investments carry considerably
more volatility and risk because they are associated with less mature economies
and less stable political systems. (See "Risk Considerations in Developing
Countries.")

RISK CONSIDERATIONS IN DEVELOPING COUNTRIES

Securities prices in developing countries can be significantly more volatile
than in developed countries, reflecting the greater uncertainties of investing
in lesser developed markets and economies. In particular, developing countries
may have relatively unstable governments, and may present the risk of
nationalization of businesses, expropriation, confiscatory taxation or, in
certain instances, reversion to closed market, centrally planned economies. Such
countries may also have restrictions on foreign ownership or prohibitions on the
repatriation of assets, and may have less protection of property rights than
developed countries.

The economies of developing countries may be predominantly based on only a few
industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in developing
countries may trade a small number of securities and may be unable to respond
effectively to increase in trading volume, potentially resulting in a lack of
liquidity and in volatility in the price of securities traded on those markets.
Also, securities markets in developing countries typically offer less regulatory
protection for investors.

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as
DECS--(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common
Stock when issued as a debt security), LYONS--(Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no coupons and
are convertible into stock), PERCS--(Preferred Equity Redemption Cumulative
Stock, an equity issue that pays a high cash dividend, has a cap price and
mandatory conversion to common stock at maturity), and PRIDES--(Preferred
Redeemable Increased Dividend Securities, which are essentially the same as
DECS; the difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

OTHER SECURITIES

The Fund may invest in preferred stocks, corporate bonds, notes, and warrants of
these companies and in cash, U.S. government securities, and money market
instruments in proportions determined by its investment adviser.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies, but which are subject to restriction on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase together
with other illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice and over-the-counter options to
15% of its net assets.

TEMPORARY INVESTMENTS

The Fund may also invest temporarily in cash, cash items, and short-term
instruments, including notes and commercial paper, for liquidity and during
times of unusual market conditions for defensive purposes. Cash items may
include obligations such as:

* certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);
* obligations issued or guaranteed as to principal and interest by the
U.S. government or any of its agencies or instrumentalities;
* and repurchase agreements.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities on a short-term or long-term basis, or both, up to one-third of the
value of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. This is a fundamental policy which may not be changed
without the approval of shareholders. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned at all times.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

PUT AND CALL OPTIONS

The Fund may also write call options on all or any portion of its portfolio to
generate income for the Fund. The Fund will write call options on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
must be listed on a recognized options exchange. Although the Fund reserves the
right to write covered call options on its entire portfolio, it will not write
such options on more than 25% of its total assets unless a higher limit is
authorized by its Trustees.

FINANCIAL FUTURES AND OPTIONS ON FUTURES

The Fund may purchase and sell financial futures contracts to hedge all or a
portion of its portfolio of long-term debt securities against changes in
interest rates. Financial futures contracts call for the delivery of particular
debt instruments issued or guaranteed by the U.S. Treasury or by specified
agencies or instrumentalities of the U.S. government at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.

The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged.

RISKS

When the Fund uses financial futures and options on financial futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the securities
in the Fund's portfolio. This may cause the futures contract and any related
options to react differently than the portfolio securities to market changes. In
addition, the Fund's investment adviser could be incorrect in its expectations
about the direction or extent of market factors such as interest rate movements.
In these events, the Fund may lose money on the futures contract or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into futures and options transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

REAL ESTATE INVESTMENT TRUSTS

VARIABLE ASSET REGULATIONS

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations
resulting from mixed funding or shared funding, the Trustees will closely
monitor the operation of mixed funding and shared funding and will consider
appropriate action to avoid material conflicts and take appropriate action in
response to any material conflict which occur. Such action could result in one
or more participating insurance companies withdrawing their investment in the
Fund.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

Purchase orders from separate accounts investing in the Fund which are received
by the insurance companies by 4:00 p.m. (Eastern time), will be computed at the
net asset value of the Fund determined on that day, as long as such purchase
orders are received by the Fund in proper form and in accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business day and as long as
federal funds in the amount of such orders are received by the Fund on the next
business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Advisers, the Fund's investment adviser,
subject to direction by the Trustees. The adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase and sale of portfolio instruments, for which it receives an annual fee
from the Fund.

ADVISORY FEES

The adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. The adviser may voluntarily choose to waive a
portion of its fees or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at any
time at its sole discretion.

ADVISER'S BACKGROUND

Federated Advisers, a Delaware business trust organized on April 11, 1989 is a
registered investment adviser under the Investment Advisers Act of 1940.

SUB-ADVISER

Under the terms of the Sub-Advisory Agreement between the fund's investment
adviser and Federated Global Research Corp. (the "Sub-Adviser"), the Sub-Adviser
will provide the Fund's investment adviser such investment advice, statistical
and other factual information as may, from time to time, be reasonably requested
by the adviser.

SUB-ADVISORY FEES

For its services under the Sub-Advisory Agreement, the Sub-Adviser receives an
allocable portion of the Fund's advisory fee. Such allocation is based on the
amount of foreign securities which the Sub-Adviser manages for the Fund. This
fee is paid by the Adviser out of its resources and is not an incremental Fund
expense.

SUB-ADVISER'S BACKGROUND

Federated Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered investment adviser under the Investment Advisers Act of 1940.

The adviser and the Sub-Adviser are subsidiaries of Federated Investors. All
of the Class A (voting) Shares of Federated Investors are owned by a trust,
the trustees of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.

Federated Advisers, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.

Linda A Duessel has been a portfolio manager for the Fund since April 1995.
Ms. Duessel joined Federated Investors in 1991 and has been a Vice President
of the Adviser since 1995. Ms. Duessel was an Assistant Vice President of
the Fund's investment adviser from 1991 until 1995. Ms. Duessel is a Chartered
Financial Analyst and received her M.S. in Industrial Administration from
Carnegie Mellon University.

Steven J. Lehman has been a portfolio manager of the Fund since August 1997.
Mr. Lehman joined the Fund's investment adviser in May 1997 as a Vice
President. From 1986 to May 1997, Mr. Lehman served as a Portfolio Manager,
then Vice President/Senior Portfolio Manager, at First Chicago NBD. Mr. Lehman
is a Chartered Financial Analyst; he received his M.A. from the University of
Chicago.

Drew J. Collins and Richard J. Lazarchic are the portfolio managers for
foreign securities.

Drew J. Collins has been a portfolio manager of the Fund since July 1997.
Mr. Collins joined Federated Investors in 1995 as a Senior Vice President of
the Fund's investment adviser. Mr. Collins served as Vice
President/Portfolio Manager of international equity portfolios at Arnhold
and Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College
Retirement Equities Fund from 1986 to 1994. Mr. Collins is a Chartered
Financial Analyst and received his M.B.A. in finance from the Wharton School
of The University of Pennsylvania.

Richard J. Lazarchic has been a portfolio manager of the Fund since April
1998. Mr. Lazarchic joined Federated Investors in March 1998 as a Vice
President of the Fund's investment adviser. From May 1979 through October
1997, Mr. Lazarchic was employed with American Express Financial Corp.,
initially as an Analyst and then as a Vice President/Senior Portfolio
Manager. Mr. Lazarchic is a Chartered Financial Analyst. He received his
M.B.A. from Kent State University.

The Trust, the adviser, and the Sub-Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of these codes are subject to review by the Trustees, and could
result in severe penalties.

DISTRIBUTION OF FUND SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp., from its own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance may be predicated upon the
amount of shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS

0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, Life of Virginia, Richmond, VA, and Aetna
Retirement Services Central Valuation Unit, Hartfort, CT, owned approximately
29.90% and 42.97%, respectively, of the voting securities of the Fund, and
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
Aetna Retirement Services Central Valuation Unit is owned by Aetna Inc. and Life
of Virginia is owned by General Electric Capital Assurance Company.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operations and for the election of Trustees in certain circumstances.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

FEDERATED
INSURANCE
SERIES

FEDERATED UTILITY FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965

CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA15222-5401

Federated Securities Corp., Distributor
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

[Graphic]

FEDERATED UTILITY FUND II

(A Portfolio of Federated
Insurance Series)

PROSPECTUS

APRIL 23, 1998

A Diversified Portfolio of Federated
Insurance Series, an Open-End,
Management Investment Company

[Graphic]

Cusip 313916108
3113008A (4/98)

FEDERATED UTILITY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated Utility Fund II (the "Fund"), a portfolio of Federated Insurance
Series (the "Trust") dated April 23, 1998. This Statement is not a prospectus.
You may request a copy of a prospectus or a paper copy of this Statement, if you
have received it electronically, free of charge by calling 1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

[Graphic]

Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Cusip 313916108
3113008B (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1 INVESTMENT OBJECTIVE AND POLICIES 1 Convertible
Securities 1 U.S. Government Obligations 1 When-Issued and Delayed Delivery
Transactions 1 Lending of Portfolio Securities 2 Repurchase Agreements 2
Reverse Repurchase Agreements 2 Investing in Securities of Other Investment
Companies 2 Restricted and Illiquid Securities 2 Portfolio Turnover 3
INVESTMENT LIMITATIONS 3 Selling Short and Buying on Margin 3 Issuing Senior
Securities and Borrowing Money 3 Pledging Assets 3 Concentration of Investments
3 Investing in Commodities 3 Investing in Real Estate 3 Lending Cash or
Securities 3 Underwriting 4 Diversification of Investments 4 Investing in
Restricted and Illiquid Securities 4 Investing in Put Options 4 Writing Covered
Call Options 4 FEDERATED INSURANCE SERIES MANAGEMENT 5 Fund Ownership 8 Trustee
Compensation 9 Trustee Liability 9 INVESTMENT ADVISORY SERVICES 9 Adviser to
the Fund 9 Advisory Fees 10 Sub-Adviser to the Fund 10 Sub-Advisory Fees 10
BROKERAGE TRANSACTIONS 10 OTHER SERVICES 10 Fund Administration 10 Custodian
and Portfolio Accountant 10 Transfer Agent 10 Independent Auditors 11
PURCHASING SHARES 11 SHAREHOLDER SERVICES 11 DETERMINING NET ASSET VALUE 11
Determining Market Value of Securities 11 MASSACHUSETTS PARTNERSHIP LAW 11 TAX
STATUS 12 The Fund's Tax Status 12 Shareholders' Tax Status 12 TOTAL RETURN 12
YIELD 12 PERFORMANCE COMPARISONS 13 Economic and Market Information 14 ABOUT
FEDERATED INVESTORS 14 Mutual Fund Market 14 Institutional Clients 14 Bank
Marketing 14 Broker/Dealers and Bank Broker/Dealer Subsidiaries 15 FINANCIAL
STATEMENTS 15 APPENDIX 15

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the Board
of Trustees (the "Trustees") held on November 14, 1995, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Trust from
Insurance Management Series to Federated Insurance Series. At a meeting of the
Trustees held on February 26, 1996, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Fund from Utility Fund to
Federated Utility Fund II. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to achieve high current income and moderate
capital appreciation. The investment objective cannot be changed without
approval of shareholders. The Fund endeavors to achieve its investment objective
by investing primarily in a professionally managed, diversified portfolio of
equity and debt securities of utility companies.

CONVERTIBLE SECURITIES

U.S. GOVERNMENT OBLIGATIONS

The Fund may also invest in U.S. government obligations which generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury
bills, notes, and bonds) and obligations issued and/or guaranteed by U.S.
government agencies or instrumentalities. These securities are backed by:

* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

RESTRICTED AND ILLIQUID SECURITIES

The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1993. The Trustees may consider the following criteria in determining the
liquidity of certain restricted securities:

PORTFOLIO TURNOVER

For the fiscal years ended December 31, 1997 and 1996, the portfolio turnover
rates for the Fund were 95% and 63%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. The deposit or payment by the
Fund of initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security on
margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of its total assets at the time of borrowing. For
purposes of this limitation, the following are not deemed to be pledges: margin
deposits for the purchase and sale of futures contracts and related options, any
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities, if, as a result of such purchase, 25% or
more of its total assets would be invested in securities of companies engaged
principally in any one industry other than the utilities industry. However, the
Fund may at any time invest 25% or more of its total assets in cash or cash
items and securities issued and/or guaranteed by the U.S.
government, its agencies, or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell futures
and stock index futures contracts and related options.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of its net assets in illiquid securities,
including, among others, repurchase agreements providing for settlement more
than seven days after notice, over-the-counter options, and certain restricted
securities not determined to be liquid under criteria established by the
Trustees.

INVESTING IN PUT OPTIONS

The Fund will not purchase put options on securities, unless the securities are
held in the Fund's portfolio and not more than 5% of the Fund's total assets
would be invested in premiums on open put option positions.

WRITING COVERED CALL OPTIONS

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Director, Member of the Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director or
Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors

3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center--Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Provident Mutual Life & Annuity Co. of
America, Valley Forge, PA, owned approximately 431,581 shares (5.18%); SAFECO
Mutual Funds/SAFECO Securities Inc., Seattle, WA, owned approximately 437,250
shares (5.24%); Life of Virginia, Richmond, VA, owned approximately 2,492,935
shares (29.90%); Lincoln Benefit Life Co. Variable Annuity, Lincoln, NE, owned
approximately 602,827 shares (7.23%); and Aetna Retirement Services Central
Valuation Unit, Hartford, CT, owned approximately 3,582,690 shares (42.97%).

TRUSTEE COMPENSATION

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies
in the Fund Complex
Thomas G. Bigley $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
John T. Conroy, Jr. $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Nicholas P. Constantakis++ $0 $0 for the Trust and
Trustee 34 other investment companies
in the Fund Complex
William J. Copeland $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 18 other investment companies
in the Fund Complex
James E. Dowd $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Lawrence D. Ellis, M.D. $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Edward L. Flaherty, Jr. $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Peter E. Madden $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
John E. Murray, Jr. $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Wesley W. Posvar $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex
Marjorie P. Smuts $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

++ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not receive any fees as of the fiscal year end of the Trust.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal years ended December 31, 1997, 1996, and 1995, the adviser earned
advisory fees of $579,563, $361,797, and $89,752, respectively, of which
$208,884, $248,058, and $89,752 were waived.

SUB-ADVISER TO THE FUND

The Fund's sub-adviser is Federated Global Research Corp. (the
"Sub-Adviser").

SUB-ADVISORY FEES

For its sub-advisory services, the Sub-Adviser receives an allocable portion of
the Fund's advisory fee as described in the prospectus. For the period from June
1, 1997 (effective date of sub-advisory contract between Federated Global
Research Corp. and Federated Utility Fund II) to December 31, 1997, Federated
Global Research Corp. received no sub-advisory fees.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended December 31, 1997, 1996, and 1995, the Fund paid
$184,051, $81,701, and $59,746, respectively, in brokerage commissions on
brokerage transactions.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. The former administrator is a
subsidiary of Federated Investors. For purposes of this Statement of Additional
Information, Federated Services Company and Federated Administrative Services
may hereinafter collectively be referred to as the "Administrators." For the
fiscal years ended December 31, 1997, 1996, and 1995, the Administrators earned
$125,002, $125,000, and $125,000, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

SHAREHOLDER SERVICES

The Shareholder Services Agreement was not in effect during the Fund's fiscal
year ended December 31, 1997.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:

MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

THE FUND'S TAX STATUS

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

For the fiscal year ended December 31, 1997, and for the period from April 14,
1994 (date of initial public investment) to December 31, 1997, the average
annual total returns for the Fund were 26.63% and 14.54%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's yield for the thirty-day period ended December 31, 1997, was 3.21%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also, the yield does not reflect the charges
and expenses of an insurance contract. You should review the performance figures
for your insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

* STANDARD & POOR'S ("S&P") DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, financial,
and public utility companies, can be used to compare the total returns of
funds whose portfolios are invested primarily in common stocks. In
addition, the S&P index assumes reinvestment of all dividends paid by
stocks listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in S&P figures.
* STANDARD & POOR'S UTILITY INDEX is an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price
of the stocks. The index also provides figures for changes in price from
the beginning of the year to date, and for a twelve month period.

* DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.

Advertisements and other sales literature for the Fund may quote total returns,
which are calculated on non- standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.

From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions compared to federally insured
bank products, including certificates of deposit and time deposits, and to money
market funds using the Lipper Analytical Services money market average.

Advertising and other promotional literature may include charts, graphs, and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in which
they invest, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Funds may include discussions of
economic, financial, and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
funds industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.

In the equity sector, Federated Investors has more than 27 years experience. As
of December 31, 1997, Federated managed 29 equity funds totaling approximately
$11.7 billion in assets across growth, value, equity income, international,
index, and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

BANK MARKETING

* Source: Investment Company Institute

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

The Fund's financial statements for the fiscal year ended December 31, 1997, are
incorporated herein by reference to the Annual Report of the Fund dated December
31, 1997 (File Nos. 33-69268 and 811-8042). Copies of the Report may be obtained
without charge by contacting the Fund.

APPENDIX

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B--Debt rated "BB" and "B" is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. "B" indicates the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS

Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as high grade Bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.

A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

(A Portfolio of Federated Insurance Series)

PROSPECTUS

This prospectus offers shares of Federated Fund for U.S. Government Securities
II (the "Fund"), which is a diversified investment portfolio in Federated
Insurance Series (the "Trust"), an open-end, diversified management investment
company. The Fund seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Limitations 4
Net Asset Value 4
Investing in the Fund 4
Purchases and Redemptions 4
What Shares Cost 4
Dividends 5
Fund Information 5
Management of the Fund 5
Distribution of Fund Shares 6
Administration of the Fund 6
Shareholder Information 6
Voting Rights 6
Tax Information 7
Federal Taxes 7
State and Local Taxes 7
Performance Information 7

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated February 6, 1998, on theFund's
financial statements for the year ended December 31, 1997, and on the following
table for the periods presented, is included in the Fund's Annual Report, which
is herein incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, contained in the Fund's
Annual Report, which may be obtained free of charge.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09 $10.29 $ 9.99 $ 9.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.59 0.54 0.27
Net realized and unrealized gain (loss) on investments 0.26 (0.18) 0.30 --
Total from investment operations 0.84 0.41 0.84 0.27
LESS DISTRIBUTIONS
Distributions from net investment income (0.39) (0.57) (0.54) (0.27)
Distributions from net realized gain on investments -- (0.04) -- --
Total distributions (0.39) (0.61) (0.54) (0.27)
NET ASSET VALUE, END OF PERIOD $10.54 $10.09 $10.29 $ 9.99
TOTAL RETURN(B) 8.58% 4.20% 8.77% 2.62%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.80% 0.48%*
Net investment income 5.98% 6.00% 6.00% 3.99%*
Expense waiver/reimbursement(c) 0.45% 1.01% 4.81% 32.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $63,099 $34,965 $12,264 $1,244
Portfolio turnover 73% 97% 65% 0%
</TABLE>
* Computed on an annualized basis.

(a) Reflects operations for the period from March 29, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 8,
1993 (start of business), to March 28, 1994, net investment income was
distributed to the Fund's adviser.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED DECEMBER 31, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities issued or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies, or instrumentalities. For purposes of this 65% statement, the Fund
will consider collateralized mortgage obligations issued by U.S. government
agencies or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies may be changed by the Trustees without the
approval of the shareholders. Shareholders will be notified before any material
change becomes effective.

ACCEPTABLE INVESTMENTS

The Fund invests in securities which are primary or direct obligations of the
U.S. government, or its agencies, or instrumentalities, or which are guaranteed
by the U.S. government, its agencies, or instrumentalities, and in certain
collateralized mortgage obligations ("CMOs"), described below, and repurchase
agreements. The prices of fixed income securities fluctuate inversely to the
direction of interest rates.

The U.S. government securities in which the Fund invests include:

* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
* notes, bonds, and discount notes issued or guaranteed by U.S.government
agencies and instrumentalities supported by the full faith and credit of
the United States;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These instrumentalities are supported by:

* the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
* the credit of the agency or instrumentality.

The Fund may also invest in CMOs which are rated AAA by a nationally recognized
statistical rating agency and which are issued by private entities such as
investment banking firms and companies related to the construction industry. The
CMOs in which the Fund may invest may be: (i) privately issued securities which
are collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government; (ii) privately issued securities which are collateralized by pools
of mortgages in which payment of principal and interest are guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; and
(iii) other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the U.S.
government. The mortgage-related securities provide for a periodic payment
consisting of both interest and principal. The interest portion of these
payments will be distributed by the Fund as income, and the capital portion will
be reinvested.

Mortgage-backed securities may be subject to certain prepayment risks because
the underlying mortgage loans may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during periods
of declining mortgage interest rates because many borrowers refinance their
mortgages to take advantage of favorable rates. At the time the Fund reinvests
the proceeds, it may receive a rate of interest which is actually lower than the
rate of interest paid on those securities.

REPURCHASE AGREEMENTS

The Fund will engage in repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. Under criteria established by the Trustees, certain
restricted securities are determined to be liquid. To the extent restricted
securities are not determined to be liquid, the Fund will limit their purchase
together with other illiquid securities including non-negotiable time deposits,
repurchase agreements providing for settlement in more than seven days after
notice, and over-the-counter options, to 15% of its net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or a long-term basis, or both, up to one-third of the value of
its total assets to broker/dealers, banks, or other institutional borrowers of
securities. This is a fundamental policy which may not be changed without
shareholder approval. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the Trustees and
will receive collateral equal to at least 100% of the value of the securities
loaned in the form of cash or U.S. government securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

VARIABLE ASSET REGULATIONS

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the Trust's
powers except those reserved for the shareholders. An Executive Committee of the
Board of Trustees handles the Board's responsibilities between meetings of the
Board.

INVESTMENT ADVISER

Both the Trust and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of these codes are subject to review by the Trustees,
and could result in severe penalties.

Advisory Fees

The Fund's adviser receives an annual investment advisory fee equal to 0.60%
of the Fund's average daily net assets. The adviser may voluntarily waive a
portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at
any time at its sole discretion.

Adviser's Background

Federated Advisers, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It
is a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $120 billion invested across more than 300
funds under management and/or administration by its subsidiaries, as of
December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through approximately 4,000
financial institutions nationwide.

Kathleen M. Foody-Malus has been a portfolio manager of the Fund since the
Fund's inception. Ms. Foody-Malus joined Federated Investors in 1983 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser
from 1990 until 1992. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

Todd A. Abraham has been a portfolio manager of the Fund since April 1997.
Mr. Abraham has been a Vice President of the Fund's investment adviser since
July 1997. Mr. Abraham joined Federated Investors in 1993 as an Investment
Analyst and served as Assistant Vice President from 1995 to 1997. Mr.
Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992 to
1993. Mr. Abraham is a Chartered Financial Analyst and received his M.B.A.
in finance from Loyola College.

DISTRIBUTION OF FUND SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, United of Omaha Life Insurance Co., Omaha, NE, and
Aetna Retirement Services Central Valuation Unit, Hartford, CT, owned
approximately 33.22% and 26.80%, respectively, of the voting securities of the
Fund, and therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders. United of Omaha Life Insurance Co. is owned by Mutual of Omaha
Insurance Company. Aetna Retirement Services Central Valuation Unit is owned by
Aetna Inc.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Trustees upon
the written request of shareholders owning at least 10% of the outstanding
shares of all series of the Trust.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

NOTES

[Graphic]Federated Investors

Federated Fund for U.S. Government Securities II

(A Portfolio of Federated Insurance Series)

Prospectus

April 23, 1998

A Diversified Portfolio of Federated Insurance Series, an Open-End
Management Investment Company

FEDERATED INSURANCE SERIES
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

Cusip 313916207

3113007A (4/98)

[Graphic]

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated Fund for U.S. Government Securities II (the "Fund"), a portfolio of
Federated Insurance Series (the "Trust") dated April 23, 1998. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

[Graphic]Federated Investors
Federated Securities Corp., Distributor
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com

Cusip 313916207

3113007B (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types of Investments
1 When-Issued and Delayed Delivery Transactions 1 Lending of Portfolio
Securities 1 Restricted and Illiquid Securities 2 Repurchase Agreements 2
Reverse Repurchase Agreements 2 Investing in Securities of Other Investment
Companies 2 Portfolio Turnover 2 INVESTMENT LIMITATIONS 3 Selling Short and
Buying on Margin 3 Issuing Senior Securities and Borrowing Money 3 Pledging
Assets 3 Concentration of Investments 3 Diversification of Investments 3
Investing in Real Estate 3 Investing in Commodities 3 Underwriting 3 Lending
Cash or Securities 3 Investing in Restricted and Illiquid Securities 4
FEDERATED INSURANCE SERIES MANAGEMENT 4 Fund Ownership 7 Trustee Compensation 8
Trustee Liability 8 INVESTMENT ADVISORY SERVICES 8 Adviser to the Fund 8
Advisory Fees 9 BROKERAGE TRANSACTIONS 9 OTHER SERVICES 9 Fund Administration 9
Custodian and Portfolio Accountant 9 Transfer Agent 9 Independent Auditors 9
PURCHASING SHARES 10 SHAREHOLDER SERVICES 10 DETERMINING NET ASSET VALUE 10
Determining Market Value of Securities 10 MASSACHUSETTS PARTNERSHIP LAW 10 TAX
STATUS 11 The Fund's Tax Status 11 Shareholders' Tax Status 11 TOTAL RETURN 11
YIELD 11 PERFORMANCE COMPARISONS 11 Economic and Market Information 12 ABOUT
FEDERATED INVESTORS 12 Mutual Fund Market 13 Institutional Clients 13 Bank
Marketing 13 Broker/Dealers and Bank Broker/Dealer Subsidiaries 13 FINANCIAL
STATEMENTS 13

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from U.S. Government Bond Fund to Federated Fund for U.S.
Government Securities II. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income. The investment
objective cannot be changed without the approval of shareholders. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities, and short-term
capital gains.

TYPES OF INVESTMENTS

The Fund invests in securities which are primary or direct obligations of the
U.S. government or its agencies or instrumentalities, or which are guaranteed by
the U.S. government, its agencies, or instrumentalities and in certain
collateralized mortgage obligations, described below, and repurchase agreements.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

Privately issued CMOs generally represent an ownership interest in federal
agency mortgage pass-through securities such as those issued by the Government
National Mortgage Association. The terms and characteristics of the mortgage
instruments may vary among pass-through mortgage loan pools.

The market for such CMOs has expanded considerably since its inception. The
size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors make
government-related pools highly liquid.

STRIPPED MORTGAGE-RELATED SECURITIES

Some of the mortgage-related securities purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest payments
on mortgage-backed securities (stripped mortgage-backed securities or
"SMBSs"). Due to the possibility of prepayments on the underlying mortgages,
SMBSs may be more interest-rate sensitive than other securities purchased by
the Fund. If prevailing interest rates fall below the level at which SMBSs
were issued, there may be substantial prepayment on the underlying mortgages,
leading to the relatively early prepayment of principal-only SMBSs and a
reduction in the amount of payment made to holders of interest-only SMBSs. It
is possible that the Fund might not recover its original investment on
interest-only SMBSs if there are substantial prepayments on the underlying
mortgages. Therefore, interest-only SMBSs generally increase in value as
interest rates rise and decrease in value as interest rates fall, counter to
changes in value experienced by most fixed income securities. The Fund's
adviser intends to use this characteristic of interest-only SMBSs to reduce
the effects of interest rate changes on the value of the Fund's portfolio,
while continuing to pursue current income.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any interest paid
on such securities. Loans are subject to termination at the option of the Fund
or the borrower. The Fund may pay reasonable administrative and custodial fees
in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing broker.
The Fund does not have the right to vote securities on loan, but would terminate
the loan and regain the right to vote if that were considered important with
respect to the investment.

RESTRICTED AND ILLIQUID SECURITIES

REPURCHASE AGREEMENTS

REVERSE REPURCHASE AGREEMENTS

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to length of time a particular security may have been
held. The Fund's policy of managing its portfolio of U.S. government securities,
including the sale of securities held for a short period of time, to achieve its
investment objective of current income may result in high portfolio turnover.
The Fund will not attempt to set or meet a portfolio turnover rate as any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective.

For the fiscal years ended December 31, 1997 and 1996, the portfolio turnover
rates for the Fund were 73% and 97%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amount
borrowed or 15% of the value of total assets at the time of borrowing.

CONCENTRATION OF INVESTMENTS

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities issued
and/or guaranteed by the U.S. government, its agencies, or instrumentalities,
and repurchase agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the securities of that
issuer. Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the Fund
considers common stock and all preferred stock of an issuer each as a single
class, regardless of priorities, series, designations, or other differences.

INVESTING IN REAL ESTATE

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

UNDERWRITING

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the Trust's
Declaration of Trust.

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Provident Mutual Life & Annuity Co. of
America, Valley Forge, PA, owned approximately 392,571 shares (5.68%); United of
Omaha Life Insurance Co., Omaha, NE, owned approximately 2,294,615 shares
(33.22%); Great-West Life & Annuity Insurance Co., Englewood, CO, owned
approximately 1,019,456 shares (14.76%); Lincoln Benefit Life Co. Variable
Annuity, Lincoln, NE, owned approximately 371,772 shares (5.38%); and Aetna
Retirement Services Central Valuation Unit, Hartford, CT, owned approximately
1,851,521 shares (26.80%).

TRUSTEE COMPENSATION

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies
in the Fund Complex

Thomas G. Bigley $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John T. Conroy, Jr. $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Nicholas P. Constantakis++ $0 $0 for the Trust and
Trustee 34 other investment companies
in the Fund Complex

William J. Copeland $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 18 other investment companies
in the Fund Complex

James E. Dowd $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Lawrence D. Ellis, M.D. $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Edward L. Flaherty, Jr. $1,454 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Peter E. Madden $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John E. Murray, Jr. $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Wesley W. Posvar $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Marjorie P. Smuts $1,321 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

++ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not receive any fees as of the fiscal year end of the Trust.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal years ended December 31, 1997, 1996, and 1995, the adviser earned
advisory fees of $278,790, $141,092, and $30,456, respectively, of which
$211,328, $141,092, and $30,456, respectively, were waived.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal years
ended December 31, 1997, 1996, and 1995, the Fund paid $0, $0, and $322,
respectively, in brokerage commissions on brokerage transactions.

Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. The former administrator is a
subsidiary of Federated Investors. For purposes of this Statement of Additional
Information, Federated Services Company and Federated Administrative Services
may hereinafter collectively be referred to as the "Administrators." For the
fiscal years ended December 31, 1997, 1996, and 1995, the Administrators earned
$125,000, $125,000, and $125,000, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

SHAREHOLDER SERVICES

The Shareholder Services Agreement was not in effect during the Fund's fiscal
year ended December 31, 1997.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:

* for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;
* in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available otherwise, as determined by an
independent pricing service;
* for unlisted equity securities, the latest mean prices; * for short-term
obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
* for all other securities, at fair value as determined in good faith by
the Trustees.

MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

THE FUND'S TAX STATUS

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

For the fiscal year ended December 31, 1997, and for the period from March 29,
1994 (date of initial public investment) to December 31, 1997, the average
annual total returns for the Fund were 8.58% and 6.40%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's yield for the thirty-day period ended December 31, 1997, was 5.67%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also, the yield does not reflect the charges
and expenses of an insurance contract. You should review the performance figures
for your insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.

Advertising and other promotional literature may include charts, graphs, and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging, and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Fund may include discussions of
economic, financial, and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.

ABOUT FEDERATED INVESTORS

In the government sector, as of December 31, 1997, Federated Investors managed 9
mortgage-backed, 6 government/agency, and 17 government money market mutual
funds, with assets approximating $5.9 billion, $1.5 billion, and $29.7 billion,
respectively. Federated trades approximately $400 million in U.S. government and
mortgage-backed securities daily and places $23 billion in repurchase agreements
each day. Federated introduced the first U.S. government fund to invest in U.S.
government bond securities in 1969. Federated has been a major force in the
short- and intermediate-term government markets since 1982 and currently manages
nearly $36 billion in government funds within these maturity ranges.

J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high-yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated Investors' service to financial professionals
and institutions has earned it high ratings in several surveys performed by
DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

* Source: Investment Company Institute

Federated High Income Bond Fund II

(A Portfolio of Federated Insurance Series)

Prospectus

This prospectus offers shares of Federated High Income Bond Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The Fund invests in a professionally managed, diversified portfolio limited
primarily to fixed income securities which seek to achieve high current income.
Shares of the Fund may be sold only to separate accounts of insurance companies
to serve as the investment medium for variable life insurance policies and
variable annuity contracts issued by insurance companies.

THE FUND MAY INVEST PRIMARILY IN LOWER RATED BONDS, COMMONLY REFERRED TO AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST THAN INVESTMENTS IN HIGHER RATED SECURITIES. PURCHASERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS FUND.

The Fund has also filed a Statement of Additional Information dated April 23,
1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Risks 4
Investment Limitations 6
Net Asset Value 6
Investing in the Fund 6
Purchases and Redemptions 6
What Shares Cost 6
Dividends 7
Fund Information 7
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 8
Shareholder Information 8
Voting Rights 8
Tax Information 9
Federal Taxes 9
State and Local Taxes 9
Performance Information 9
Appendix 9

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated February 6, 1998, on the Fund's
financial statements for the year ended December 31, 1997, and on the following
table for the periods presented, is included in the Fund's Annual Report, which
is herein incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, contained in the Fund's
Annual Report, which may be obtained free of charge.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.24 $9.79 $8.87 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.88 0.88 0.85 0.75
Net realized and unrealized gain (loss) on investments 0.48 0.45 0.89 (1.12)
Total from investment operations 1.36 1.33 1.74 (0.37)
LESS DISTRIBUTIONS
Distributions from net investment income (0.61) (0.88) (0.82) (0.75)
Distributions in excess of net investment income(d) -- -- -- (0.01)
Distributions from net realized gain on investments (0.04) -- -- --
Total distributions (0.65) (0.88) (0.82) (0.76)
NET ASSET VALUE, END OF PERIOD $10.95 $10.24 $9.79 $8.87
TOTAL RETURN(B) 13.83% 14.31% 20.38% (3.73%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.80% 0.41%*
Net investment income 8.73% 9.23% 9.27% 9.11%*
Expense waiver(c) 0.09% 0.59% 3.40% 10.01%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $156,164 $66,043 $20,165 $1,457
Portfolio turnover 52% 51% 48% 18%
</TABLE>
* Computed on an annualized basis.

(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to February 1, 1994, the Fund had no public
investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED DECEMBER 31, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Board of Trustees
("Trustees") have not established separate classes of shares.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek high current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

Unless stated otherwise, the Trustees can change the investment policies without
the approval of shareholders. Shareholders will be notified before any material
change becomes effective. The Fund endeavors to achieve its objective by
investing primarily in a professionally managed, diversified portfolio of fixed
income securities. The fixed income securities in which the Fund intends to
invest are lower-rated corporate debt obligations, which are commonly referred
to as "junk bonds." Some of these fixed income securities may involve equity
features. Capital growth will be considered, but only when consistent with the
investment objective of high current income.

ACCEPTABLE INVESTMENTS

The Fund invests at least 65% of its assets in lower-rated fixed income bonds.
Under normal circumstances, the Fund will not invest more than 10% of the value
of its total assets in equity securities. The fixed income securities in which
the Fund invests include, but are not limited to:

* preferred stocks;
* bonds;
* convertible securities;
* debentures;
* notes;
* equipment lease certificates; and
* equipment trust certificates.

The securities in which the Fund may invest are generally rated BBB or lower by
Standard & Poor's ("S&P") or Fitch IBCA, Inc. ("Fitch") or Baa or lower by
Moody's Investors Service, Inc. ("Moody's"), or are not rated but are determined
by the Fund's investment adviser to be of comparable quality, and may include
bonds in default. Securities which are rated BBB or lower by S&P or Fitch or Baa
or lower by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than highly rated bonds. A description
of the rating categories is contained in the Appendix to this prospectus. There
is no lower limit with respect to rating categories for securities in which the
Fund may invest. See "Investment Risks" below.

CONVERTIBLE SECURITIES

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by a
nationally recognized statistical rating organization ("NRSRO") or in the Fund
holding such securities where they have acquired a rating below investment grade
after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

Please see "Investment Risks."

FOREIGN SECURITIES

The Fund may invest in foreign securities, including foreign securities not
publicly traded in the United States, which may include any of the types of
securities described above (see "Acceptable Investments"). Investments in
foreign securities, particularly those of non-governmental issuers, involve
considerations which are not ordinarily associated with investments in domestic
issuers. These considerations include the possibility of expropriation, the
unavailability of financial information or the difficulty of interpreting
financial information prepared under foreign accounting standards, less
liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.

TEMPORARY INVESTMENTS

The Fund may invest temporarily in cash and short-term obligations for
defensive purposes during times of unusual market conditions. Short-term
obligations may include:

* certificates of deposit;
* commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's, or
F-1 or F-2 by Fitch and variable rate demand master notes;
* short-term notes;
* obligations issued or guaranteed as to principal and interest by the
U.S. government or any of its agencies or instrumentalities; and
* repurchase agreements.

REPURCHASE AGREEMENTS

The Funds will engage in repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities.

In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that, under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase together
with other illiquid securities including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice to 15% of its net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or long-term basis, or both, up to one-third of the value of its
total assets, to broker/dealers, banks, or other institutional borrowers of
securities. This is a fundamental policy which may not be changed without
shareholder approval. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100% of the value of the securities loaned at all times.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

VARIABLE ASSET REGULATIONS

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

INVESTMENT RISKS

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

The corporate debt obligations in which the Fund invests are usually not in the
three highest rating categories of the NRSROs (AAA, AA, or A for S&P or Fitch,
and Aaa, Aa or A for Moody's), but are in the lower rating categories or are
unrated but are of comparable quality and are regarded as having predominately
speculative characteristics. Lower-rated or unrated bonds are commonly referred
to as "junk bonds." There is no minimal acceptable rating for a security to be
purchased or held in the Fund's portfolio, and the Fund may, from time to time,
purchase or hold securities rated in the lowest rating category and may include
bonds in default. A description of the rating categories is contained in the
Appendix to this prospectus.

Lower-rated securities will usually offer higher yields than higher-rated
securities. However, there is more risk associated with these investments. This
is because of reduced creditworthiness and increased risk of default.
Lower-rated securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the prices or liquidity of
lower-rated securities could include adverse news affecting major issuers,
underwriters, or dealers in lower-rated securities. In addition, since there are
fewer investors in lower-rated securities, it may be harder to sell the
securities at an optimum time. As a result of these factors, lower-rated
securities tend to have more price volatility and carry more risk to principal
and income than higher-rated securities.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased.

In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. In 1989, legislation was
enacted that requires federally insured savings associations to divest their
holdings of lower-rated bonds by 1994. The reduction of the number of
institutions empowered to purchase and hold lower-rated bonds could have an
adverse impact on the overall liquidity of the market. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may also
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

The Fund may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and the
entire obligation becomes due only upon maturity. Pay-in-kind securities make
periodic payments in the form of additional securities (as opposed to cash). The
price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon bonds and
pay-in-kind securities be reported as income to the Fund even though the Fund
received no cash interest until the maturity or payment date of such securities.

Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Fund owns a bond which is
called, the Fund will receive its return of principal earlier than expected and
would likely be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.

AS A PERCENTAGE
OF TOTAL MARKET VALUE OF
BOND HOLDINGS AS OF
CREDIT RATING DECEMBER 31, 1997
BB & BBB 18.4%
B 70.5%
CCC 3.6%
D 0.1%
Not Rated 7.4%
Total 100.0%

REDUCING RISKS OF LOWER-RATED SECURITIES

The Fund's investment adviser believes that the risks of investing in
lower-rated securities can be reduced. The professional portfolio management
techniques used by the Fund to attempt to reduce these risks include:

CREDIT RESEARCH

The Fund's investment adviser will perform its own credit analysis in addition
to using recognized rating agencies and other sources, including discussions
with the issuer's management, the judgment of other investment analysts, and its
own informed judgment. The adviser's credit analysis will consider the issuer's
financial soundness, its responsiveness to changes in interest rates and
business conditions, and its anticipated cash flow, interest, or dividend
coverage and earnings. In evaluating an issuer, the adviser places special
emphasis on the estimated current value of the issuer's assets rather than
historical cost.

DIVERSIFICATION

The Fund invests in securities of many different issuers, industries, and
economic sectors to reduce portfolio risk.

ECONOMIC ANALYSIS

The Fund's adviser will analyze current developments and trends in the economy
and in the financial markets. When investing in lower-rated securities, timing
and selection are critical, and analysis of the business cycle can be important.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

The Fund will not:

* invest more than 15% of its net assets in illiquid securities.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund
reserves the right to reject any purchase request. The Fund's shares are used
solely as the investment vehicle for separate accounts of insurance companies
offering variable annuity contracts and variable life insurance policies. The
use of Fund shares as investments for both variable annuity contracts and
variable life insurance policies is referred to as "mixed funding." The use of
Fund shares as investments by separate accounts of unaffiliated life insurance
companies is referred to as "shared funding."

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations,
resulting from mixed funding or shared funding, the Trustees of the Fund will
closely monitor the operation of mixed funding and shared funding and will
consider appropriate action to avoid material conflicts and take appropriate
action in response to any material conflicts which occur. Such action could
result in one or more participating insurance companies withdrawing their
investment in the Fund.

WHAT SHARES COST

The net asset value of shares is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of a
Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; or (iii) the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the Trust's
powers except those reserved for the shareholders. An Executive Committee of the
Board of Trustees handles the Board's responsibilities between meetings of the
Board.

INVESTMENT ADVISER

Both the Fund and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES

The Fund's adviser receives an annual investment advisory fee equal to 0.60% of
the Fund's average daily net assets. The adviser may voluntarily choose to waive
a portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at any
time at its sole discretion.

ADVISER'S BACKGROUND

Mark E. Durbiano has been a portfolio manager of the Fund since the Fund
commenced operations. Mr. Durbiano joined Federated Investors in 1982 and
has been a Senior Vice President of the Fund's investment adviser since
January 1996. From 1988 through 1995, Mr. Durbiano was a Vice President of
the Fund's investment adviser. Mr. Durbiano is a Chartered Financial Analyst
and received his M.B.A. in Finance from the University of Pittsburgh.

Stefanie L. Bachhuber has been a portfolio manager of the Fund since April
1998. Ms. Bachhuber joined Federated Investors in 1993 as an Investment
Analyst and has been an Assistant Vice President of the Fund's investment
adviser since 1996. Ms. Bachhuber is a Chartered Financial Analyst and
earned her M.B.A. with a concentration in Finance, from Duke University in
1993.

DISTRIBUTION OF SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, Life of Virginia, Richmond, VA, and Aetna
Retirement Services Central Valuation Unit, Hartford, CT, owned approximately
25.19% and 45.42%, respectively, of the voting securities of the Fund, and
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
Aetna Retirement Services is owned by Aetna Inc.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

TAX INFORMATION

FEDERAL TAXES

The Fund intends to comply with the variable asset diversification regulations
which are described earlier in this Prospectus. If the Fund fails to comply with
these regulations, contracts invested in the Fund shall not be treated as
annuity, endowment, or life insurance contracts under the Internal Revenue Code.

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is calculated
by dividing the net investment income per share (as defined by the SEC) earned
by the Fund over a thirty-day period by the offering price per share of the Fund
on the last day of the period. This number is then annualized using semi-annual
compounding.

The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders. Performance information will not reflect the charges and expenses
of a variable annuity or variable life insurance contract. Because shares of the
Fund can only be purchased by a separate account of an insurance company
offering such a contract, you should review the performance figures of the
contract in which you are invested, which performance figures will accompany any
advertisement of the Fund's performance.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

APPENDIX

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.

C--The rating C is reserved for income bonds on which no interest is being paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH IBCA, INC., LONG-TERM DEBT RATINGS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.

DDD, DD, and D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

NR--NR indicates that Fitch does not rate the specific issue.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

FITCH IBCA, INC., COMMERCIAL PAPER RATINGS

F-1--(Highest Grade) Commercial paper assigned this rating is regarded as having
the strongest degree of assurance for timely payment.

F-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

NOTES

[Graphic]

FEDERATED HIGH INCOME BOND FUND II

(A Portfolio of Federated Insurance Series)

PROSPECTUS
APRIL 23, 1998

A Diversified Portfolio of Federated Insurance Series, an Open-End
Management Investment Company

FEDERATED
INSURANCE
SERIES
FEDERATED HIGH INCOME BOND FUND II Federated Investors Funds 5800 Corporate
Drive Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

Cusip 313916306
3113009A (4/98)

[Graphic]

FEDERATED HIGH INCOME BOND FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated High Income Bond Fund II (the "Fund"), a portfolio of Federated
Insurance Series (the "Trust") dated April 23, 1998. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

[Graphic]

Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com

Cusip 313916306
3113009B (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types of Investments
1 Currency Risk 2 Investing in Foreign Currencies 2 Repurchase Agreements 3
Reverse Repurchase Agreements 3 When-Issued and Delayed Delivery Transactions 4
Lending of Portfolio Securities 4 Investing in Securities of Other Investment
Companies 4 Restricted and Illiquid Securities 4 Portfolio Turnover 4
INVESTMENT LIMITATIONS 4 Selling Short and Buying on Margin 4 Issuing Senior
Securities and Borrowing Money 5 Pledging Assets 5 Concentration of Investments
5 Investing in Commodities 5 Investing in Real Estate 5 Lending Cash or
Securities 5 Underwriting 5 Diversification of Investments 5 Investing in
Restricted and Illiquid Securities 5 FEDERATED INSURANCE SERIES MANAGEMENT 6
Fund Ownership 9 Trustee Compensation 10 Trustee Liability 10 INVESTMENT
ADVISORY SERVICES 10 Adviser to the Fund 10 Advisory Fees 11 BROKERAGE
TRANSACTIONS 11 OTHER SERVICES 11 Fund Administration 11 Custodian and
Portfolio Accountant 11 Transfer Agent 11 Independent Auditors 12 PURCHASING
SHARES 12 SHAREHOLDER SERVICES 12 DETERMINING NET ASSET VALUE 12 Determining
Market Value of Securities 12 MASSACHUSETTS PARTNERSHIP LAW 12 TAX STATUS 13
The Fund's Tax Status 13 Shareholders' Tax Status 13 TOTAL RETURN 13 YIELD 13
PERFORMANCE COMPARISONS 14 Economic and Market Information 15 ABOUT FEDERATED
INVESTORS 15 Mutual Fund Market 15 Institutional Clients 15 Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer Subsidiaries 16 FINANCIAL STATEMENTS 16

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from Corporate Bond Fund to Federated High Income Bond Fund
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities, including
the Fund. The shares in any one portfolio may be offered in separate classes. As
of the date of this Statement, the Trustees have not established separate
classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek high current income. The investment
objective cannot be changed without approval of shareholders.

TYPES OF INVESTMENTS

The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of fixed income securities. Some
of these fixed income securities may involve equity features. Capital growth
will be considered, but only when consistent with the investment objective of
high current income.

CORPORATE DEBT SECURITIES

Corporate debt securities may bear fixed, fixed and contingent, or variable
rates of interest. They may involve equity features such as conversion or
exchange rights, warrants for the acquisition of common stock of the same or a
different issuer, participations based on revenues, sales or profits, or the
purchase of common stock in a unit transaction (where corporate debt
securities and common stock are offered as a unit).

Equipment lease or trust certificates are secured obligations issued in serial
form, usually sold by transportation companies such as railroads or airlines,
to finance equipment purchases. The certificate holders own a share of the
equipment, which can be resold if the issuer of the certificate defaults. The
Fund does not currently intend to invest more than 5% of its assets in
equipment lease certificates.

CONVERTIBLE SECURITIES

DECS, or similar instruments marketed under different names, offer a
substantial dividend advantage with the possibility of unlimited upside
potential if the price of the underlying common stock exceeds a certain level.
DECS convert to common stock at maturity. The amount received is dependent on
the price of the common stock at the time of maturity. DECS contain two call
options at different strike prices. The DECS participate with the common stock
up to the first call price. They are effectively capped at that point unless
the common stock rises above a second price point, at which time they
participate with unlimited upside potential.

PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited
to a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises.

EQUITY SECURITIES

Generally, less than 10% of the value of the Fund's total assets will be
invested in equity securities, including common stocks, warrants, or rights.
The Fund's investment adviser may choose to exceed this 10% limitation if
unusual market conditions suggest such investments represent a better
opportunity to reach the Fund's investment objective.

TEMPORARY INVESTMENTS

The Fund may also invest in temporary investments for defensive purposes
during times of unusual market conditions.

CERTIFICATES OF DEPOSIT

The Fund may invest in certificates of deposit of domestic and foreign banks
and savings and loans if they have capital, surplus, and undivided profits of
over $100,000,000, or if the principal amount of the instrument is insured by
the Bank Insurance Fund (BIF) or the Savings Association Insurance Fund
(SAIF), both of which are administered by the Federal Deposit Insurance
Corporation. These instruments may include Eurodollar Certificates of Deposit
issued by foreign branches of U.S. or foreign banks, Eurodollar Time Deposits
which are U.S. dollar-denominated deposits in foreign branches of U.S. or
foreign banks, Canadian Time Deposits which are U.S. dollar-denominated
deposits issued by branches of major Canadian banks located in the United
States, and Yankee Certificates of Deposit which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and held in
the United States.

CURRENCY RISK

To the extent that debt securities purchased by the Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value, the value of interest earned,
gains and losses realized on the sale of securities, and net investment income
and capital gains, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of the Fund
assets denominated in that currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.

The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation, and
other economic and political conditions. Although the Fund values its assets
daily in U.S. dollars, the Fund may not convert its holdings of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.

The Fund will engage in foreign currency exchange transactions in connection
with its investments in foreign securities. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies.

INVESTING IN FOREIGN CURRENCIES

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may enter into forward foreign currency exchange contracts in order
to protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and a foreign currency involved in an
underlying transaction. However, forward foreign currency exchange contracts
may limit potential gains which could result from a positive change in such
currency relationships. The Fund's investment adviser believes that it is
important to have the flexibility to enter into forward foreign currency
exchange contracts whenever it determines that it is in the Fund's best
interest to do so. The Fund will not speculate in foreign currency exchange.

There is no limitation as to the percentage of the Fund's assets that may be
committed to such contracts.

The Fund does not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts when the Fund would be obligated to
deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency or, in the
case of a "cross-hedge" denominated in a currency or currencies that the
Fund's adviser believes will tend to be closely correlated with the currency
with regard to price movements. Generally, the Fund does not enter into a
forward foreign currency exchange contract with a term longer than one year.

FOREIGN CURRENCY OPTIONS

A foreign currency option provides the option buyer with the right to buy or
sell a stated amount of foreign currency at the exercise price on a specified
date or during the option period. The owner of a call option has the right,
but not the obligation, to buy the currency. Conversely, the owner of a put
option has the right, but not the obligation to sell the currency.

When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the seller
or the buyer may, in the secondary market, close its position during the
option period at any time prior to expiration.

A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on foreign currency generally
falls in value if the underlying currency depreciates in value. Although
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, the option will not limit the
movement in the value of such currency. For example, if the Fund were holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of
the currency, the Fund would not have to exercise its put option. Likewise, if
the Fund were to enter into a contract to purchase a security denominated in
foreign currency and, in conjunction with that purchase, were to purchase a
foreign currency call option to hedge against a rise in value of the currency,
and if the value of the currency instead depreciated between the date of
purchase and the settlement date, the Fund would not have to exercise its
call. Instead, the Fund could acquire in the spot market the amount of foreign
currency needed for settlement.

SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS

Buyers and sellers of foreign currency options are subject to the same risks
that apply to options generally.

In addition, there are certain additional risks associated with foreign
currency options. The markets in foreign currency options are relatively new,
and the Fund's ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. Although the Fund
will not purchase or write such options unless and until, in the opinion of
the Fund's adviser, the market for them has developed sufficiently to ensure
that the risks in connection with such options are not greater than the risks
in connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option at any specific
time.

In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the use of foreign currency options, investors may be disadvantaged by having
to deal in an odd lot market (generally consisting of transactions of less
than $1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.

Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e. less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. option markets are closed
while the markets for the underlying currencies remain open, significant price
and rate movements may take place in the underlying markets that cannot be
reflected in the options markets until they reopen.

REPURCHASE AGREEMENTS

The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase agreements,
a court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Fund's adviser to be
creditworthy, pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or cash equivalent collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

RESTRICTED AND ILLIQUID SECURITIES

PORTFOLIO TURNOVER

For the fiscal years ended December 31, 1997 and 1996, the portfolio turnover
rates of the Fund were 52% and 51%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of its total assets at the time of borrowing.

CONCENTRATION OF INVESTMENTS

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities issued
and/or guaranteed by the U.S. government, its agencies, or instrumentalities,
and repurchase agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the securities of that
issuer. Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the Fund
considers common stock and all preferred stock of an issuer each as a single
class, regardless of priorities, series, designations, or other differences.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of its total assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain restricted securities not determined to
be liquid under criteria established by the Trustees.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Retirement Services, Hartford, CT,
owned approximately 7,491,744 shares (45.42%); Life of Virginia, Richmond, VA,
owned approximately 4,154,795 shares (25.19%); and Lincoln Benefit Life Co.,
Lincoln, NE, owned approximately 1,411,163 shares (8.56%).

TRUSTEE COMPENSATION

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies
in the Fund Complex

Thomas G. Bigley $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John T. Conroy, Jr. $194.91 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Nicholas P. Constantakis++ $0 $0 for the Trust and
Trustee 34 other investment companies
in the Fund Complex

William J. Copeland $194.91 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 18 other investment companies
in the Fund Complex

James E. Dowd $194.91 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Lawrence D. Ellis, M.D. $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Edward L. Flaherty, Jr. $194.91 $122,362 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Peter E. Madden $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John E. Murray, Jr. $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Wesley W. Posvar $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Marjorie P. Smuts $177.15 $111,222 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

++ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not receive any fees as of the fiscal year end of the Trust.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

The adviser shall not be liable to the Fund, the Trust, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal years ended December 31, 1997, 1996, and 1995, the adviser earned
advisory fees of $637,608, $240,233, and $46,425, respectively, of which
$95,075, $203,132, and $46,425, respectively, were voluntarily waived.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or by affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended December 31, 1997, 1996, and 1995, the Fund paid no brokerage
commissions on brokerage transactions.

OTHER SERVICES

FUND ADMINISTRATION

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

SHAREHOLDER SERVICES

The Shareholder Services Agreement was not in effect in the Fund's fiscal year
ended December 31, 1997.

DETERMINING NET ASSET VALUE

The net asset value of the Fund generally changes each day. The days on which
net asset value is calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:

MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

THE FUND'S TAX STATUS

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

The Fund's average annual total returns for the one-year period ended December
31, 1997, and for the period from February 2, 1994 (date of initial public
investment) to December 31, 1997, were 13.83% and 11.33%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1997, was
7.86%.

The Fund's yield is determined by dividing the net investment income per share
(as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This value
is then annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a twelve month period and is reinvested every six months. The yield
does not necessarily reflect income actually earned by the Fund because of
certain adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. Also the yield does not
reflect the charges and expenses of an insurance contract. You should review the
performance figures for your insurance contract, which figures reflect the
applicable charges and expenses of the contract. Such performance figures will
accompany any advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

* LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds approximates
nine years. Tracked by Lehman Brothers, Inc., the index calculates total
returns for one month, three month, twelve month, and ten year periods and
year-to-date.

* LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index measuring
both the capital price changes and income provided by the underlying
universe of securities, comprised of U.S. Treasury obligations, U.S.
agency obligations, foreign obligations, U.S. investment-grade
corporate debt and mortgage-backed obligations.
* LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the
same types of issues as defined above. However, the average maturity of the
bonds included on this index approximates 22 years.

* LEHMAN BROTHERS HIGH YIELD INDEX and its sub-indices are based on credit
quality and/or duration. The Lehman Brothers High Yield Index covers the
universe of fixed rate, publicly issued, noninvestment grade debt
registered with the SEC. All bonds included in the Lehman Brothers High
Yield Index must be dollar-denominated and nonconvertible and have at least
one year remaining to maturity and an outstanding par value of at least
$100 million. Generally securities must be rated Ba1 or lower by Moody's
Investors Service, including defaulted issues. If no Moody's rating is
available, bonds must be rated BB+ or lower by S&P; and if no S&P rating is
available, bonds must be rated below investment grade by Fitch IBCA, Inc. A
small number of unrated bonds are included in the index; to be eligible
they must have previously held a high yield rating or have been associated
with a high yield issuer, and must trade accordingly.

* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk adjusted
returns. The maximum rating is five stars and ratings are effective for two
weeks.

Advertisements and sales literature for the Fund may quote total returns which
are calculated on nonstandardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.

ECONOMIC AND MARKET INFORMATION

ABOUT FEDERATED INVESTORS

In the corporate bond sector, as of December 31, 1997, Federated Investors
managed 11 money market funds and 16 bond funds with assets approximating $17.1
billion and $5.6 billion, respectively. Federated Investors' corporate bond
decision making--based on intensive, diligent credit analysis--is backed by over
22 years of experience in the corporate bond sector. In 1972, Federated
introduced one of the first high-yield bond funds in the industry. In 1983,
Federated was one of the first fund managers to participate in the asset-backed
securities market, a market totaling more than $200 billion.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

*Source: Investment Company Institute

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any other
mutual fund distributor. Federated Investors' service to financial professionals
and institutions has earned it high ratings in several surveys performed by
DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

Federated Prime Money Fund II

(A Portfolio of Federated Insurance Series)

PROSPECTUS

This prospectus offers shares of Federated Prime Money Fund II (the "Fund"),
which is an investment portfolio in Federated Insurance Series (the "Trust"), an
open-end management investment company. The Fund invests in money market
instruments maturing in thirteen months or less to achieve current income
consistent with stability of principal and liquidity. Shares of the Fund may
only be sold to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Risks 5
Investment Limitations 5
Net Asset Value 5
Investing in the Fund 5
Purchases and Redemptions 5
What Shares Cost 5
Dividends 6
Fund Information 6
Management of the Fund 6
Distribution of Shares 6
Administration of the Fund 7
Shareholder Information 7
Voting Rights 7
Tax Information 7
Federal Taxes 7
State and Local Taxes 8
Performance Information 8

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated February 6, 1998, on the Fund's
financial statements for the year ended December 31, 1997, and on the following
table for the periods presented, is included in the Fund's Annual Report, which
is herein incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, contained in the Fund's
Annual Report, which may be obtained free of charge.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.05) (0.05) (0.01)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(B) 4.93% 4.75% 5.20% 0.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.80% 0.80%*
Net investment income 4.84% 4.68% 5.12% 4.26%*
Expense waiver(c) 0.20% 0.57% 2.69% 71.84%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $59,659 $45,655 $17,838 $552
</TABLE>
* Computed on an annualized basis.

(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10, 1993
(start of business) to November 17, 1994, the Fund had no public investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED DECEMBER 31, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Board of Trustees
("Trustees") have not established separate classes of shares.

INVESTMENT INFORMATION

Investment Objective

The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by complying
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual funds and by
following the investment policies described in this prospectus.

Investment Policies

The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The average
maturity of the money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies of the Fund may be changed by Trustees without the approval
of shareholders. Shareholders will be notified before any material change in
these policies becomes effective.

Acceptable Investments

The Fund invests in high-quality money market instruments that are either rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations (NRSROs) or of comparable quality to
securities having such ratings. Examples of these instruments include, but are
not limited to:

* domestic issues of corporate debt obligations, including variable rate
demand notes;
* commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);
* certificates of deposit, demand and time deposits, bankers' acceptances and
other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
* short-term credit facilities, such as demand notes; * asset-backed
securities; * obligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities ("Government Securities");
* repurchase agreements; and
* other money market instruments.

The Fund invests only in instruments denominated and payable in U.S.
dollars.

VARIABLE RATE DEMAND NOTES

Variable rate demand notes are long-term corporate debt instruments that have
variable or floating interest rates and provide the Fund with the right to
tender the security for repurchase at its stated principal amount plus accrued
interest. Such securities typically bear interest at a rate that is intended to
cause the securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally based on
a published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals. See
"Demand Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest adjustment or the date on which the Fund
may next tender the security for repurchase.

BANK INSTRUMENTS

The Fund only invests in bank instruments either issued by an institution having
capital, surplus and undivided profits over $100 million or insured by the Bank
Insurance Fund (BIF) or the Savings Association Insurance Fund (SAIF). Bank
instruments may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs").
The Fund will treat securities credit-enhanced by a bank as bank instruments.

SHORT-TERM CREDIT FACILITIES

Demand notes are short-term borrowing arrangements between a corporation and an
institutional lender (such as the Fund) payable upon demand by either party. The
notice period for demand typically ranges from one to seven days, and the party
may demand full or partial payment. The Fund may also enter into, or acquire
participations in, short-term revolving credit facilities with corporate
borrowers. Demand notes and other short-term credit arrangements usually provide
for floating or variable rates of interest.

ASSET-BACKED SECURITIES

Asset-backed securities are securities issued by special purpose entities whose
primary assets consist of a pool of loans or accounts receivable. The securities
may take the form of beneficial interest in a special purpose trust, limited
partnership interests or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some form of
credit or liquidity enhancement, payments on the securities depend predominately
upon collections of the loans and receivables held by the issuer.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.

CREDIT ENHANCEMENT

Certain of the Fund's acceptable investments may have been credit-enhanced by a
guaranty, letter of credit or insurance. Any bankruptcy, receivership, default,
or change in the credit quality of the party providing the credit enhancement
will adversely affect the quality and marketability of the underlying security
and could cause losses to the Fund and affect its share price.

DEMAND FEATURES

The Fund may acquire securities that are subject to puts and standby commitments
("demand features") to purchase the securities at their principal amount
(usually with accrued interest) within a fixed period (usually seven days)
following a demand by the Fund. The demand feature may be issued by the issuer
of the underlying securities, a dealer in the securities or by another third
party, and may not be transferred separately from the underlying security. The
Fund uses these arrangements to provide the Fund with liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restriction on resale under federal securities
law. Under criteria established by the Trustees, certain restricted securities
are determined to be liquid. To the extent restricted securities are not
determined to be liquid, the Fund will limit their purchase together with other
illiquid securities including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after notice, and
over-the-counter options to 10% of its net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities on a short-term or long-term basis, or both, up to one-third of the
value of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. This is a fundamental policy which may not be changed
without shareholder approval. The Fund will only enter into loan arrangements
with broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100% of the value of the securities loaned at all times.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

CONCENTRATION OF INVESTMENTS

The Fund may invest 25% or more of its total assets in commercial paper issued
by finance companies. The finance companies in which the Fund intends to invest
can be divided into two categories, commercial finance companies and consumer
finance companies. Commercial finance companies are principally engaged in
lending to corporations or other businesses. Consumer finance companies are
primarily engaged in lending to individuals. Captive finance companies or
finance subsidiaries which exist to facilitate the marketing and financial
activities of their parent will, for purposes of industry concentration, be
classified by the Fund in the industry of its parent corporation.

In addition, the Fund may invest more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

VARIABLE ASSET REGULATIONS

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

INVESTMENT RISKS

ECDs, ETDs, Yankee CDs, CCPs, and Europaper are subject to somewhat different
risks than domestic obligations of domestic banks. Examples of these risks
include international, economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the Fund's adviser in selecting investments for
the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share of the Fund is determined by subtracting total liabilities from
total assets and dividing by the number of shares outstanding.

The Fund cannot guarantee that its net asset value will always remain at $1.00
per share.

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations
resulting from mixed funding or shared funding, the Trustees of the Fund will
closely monitor the operation of mixed funding and shared funding and will
consider appropriate action to avoid material conflicts and take appropriate
action in response to any material conflicts which occur. Such action could
result in one or more participating insurance companies withdrawing their
investment in the Fund.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared daily and paid monthly.

Shares of the Fund begin earning dividends on the day that the Fund receives
federal funds. Dividends of the Fund are automatically reinvested in additional
shares of such Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Advisers, the Fund's investment adviser,
subject to direction by the Trustees. The adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase, sale, or exchange of portfolio instruments, for which it receives an
annual fee from the Fund.

ADVISORY FEES

The adviser receives an annual investment advisory fee equal to 0.50% of the
Fund's average daily net assets. The adviser may voluntarily choose to waive a
portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at any
time at its sole discretion.

ADVISER'S BACKGROUND

DISTRIBUTION OF SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund at an annual rate which
relates to the average aggregrate daily net assets of all funds advised by
affiliates of Federated Investors as specified below:

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, United of Omaha Life Insurance Co., Omaha, NE,
owned approximately 36.07% of the voting securities of the Fund, and therefore,
may for certain purposes be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders. United of Omaha
Life Insurance Co. is owned by Mutual of Omaha Insurance Company.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises its total return, yield and effective
yield.

The yield represents the annualized rate of income earned on an investment in
the Fund over a seven-day period. It is the annualized dividends earned during
the period on the investment, shown as a percentage of the investment. The
effective yield is calculated similarly to the yield, but, when annualized, the
income earned on an investment in the Fund is assumed to be reinvested daily.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.

Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

[Graphic]

FEDERATED PRIME MONEY FUND II

(A Portfolio of Federated
Insurance Series)

Prospectus

April 23, 1998

A Portfolio of Federated Insurance Series, an Open-End Management Investment
Company

FEDERATED INSURANCE SERIES
FEDERATED PRIME MONEY FUND II Federated Investors Funds 5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh,PA 15222-3779

CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

Cusip 313916504
3113011A (4/98)

[Graphic]

FEDERATED PRIME MONEY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated Prime Money Fund II (the "Fund"), a portfolio of Federated Insurance
Series (the "Trust") dated April 23, 1998. This Statement is not a prospectus.
You may request a copy of a prospectus or a paper copy of this Statement, if you
have received it electronically, free of charge by calling 1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

[Graphic]

Federated Securities Corp., Distributor
Federated Investors Towers
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com

Cusip 313916504
3113011B (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types of Investments
1 When-Issued and Delayed Delivery Transactions 2 Lending of Portfolio
Securities 2 Investing in Securities of Other Investment Companies 2 Repurchase
Agreements 2 Reverse Repurchase Agreements 2 Credit Enhancement 3 Restricted
and Illiquid Securities 3 INVESTMENT LIMITATIONS 3 Selling Short and Buying on
Margin 3 Issuing Senior Securities and Borrowing Money 3 Pledging Assets 3
Concentration of Investments 3 Investing in Commodities 3 Investing in Real
Estate 3 Lending Cash or Securities 4 Underwriting 4 Diversification of
Investments 4 Investing in Restricted and Illiquid Securities 7 Regulatory
Compliance 4 FEDERATED INSURANCE SERIES MANAGEMENT 5 Fund Ownership 8 Trustee
Compensation 9 Trustee Liability 9 INVESTMENT ADVISORY SERVICES 9 Adviser to
the Fund 9 Advisory Fees 10 BROKERAGE TRANSACTIONS 10 OTHER SERVICES 10 Fund
Administration 10 Custodian and Portfolio Accountant 10 Transfer Agent 10
Independent Auditors 11 PURCHASING SHARES 11 SHAREHOLDER SERVICES 11
DETERMINING NET ASSET VALUE 11 Use of the Amortized Cost Method 11
MASSACHUSETTS PARTNERSHIP LAW 12 TAX STATUS 12 The Fund's Tax Status 12
Shareholders' Tax Status 12 TOTAL RETURN 13 YIELD 13 EFFECTIVE YIELD 13
PERFORMANCE COMPARISONS 13 Economic and Market Information 14 ABOUT FEDERATED
INVESTORS 14 Mutual Fund Market 15 Institutional Clients 15 Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer Subsidiaries 15 FINANCIAL STATEMENTS 15

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from Prime Money Fund to Federated Prime Money Fund II. The
Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest in separate portfolios of securities, including the Fund.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have not established separate classes of
shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.

TYPES OF INVESTMENTS

The Fund invests exclusively in money market instruments which mature in 397
days or less and which include, but are not limited to, high-quality commercial
paper and variable rate master demand notes, bank instruments, and U.S.
government obligations.

BANK INSTRUMENTS

In addition to domestic bank obligations such as certificates of deposit, demand
and time deposits, savings shares, and bankers' acceptances, the Fund may invest
in:

* Eurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks;
* Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks;
* Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the U.S.; and
* Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the U.S.

RATINGS

A nationally recognized statistical rating organization's ("NRSRO's") two
highest rating categories are determined without regard for sub-categories and
gradations. For example, securities rated A-1+, A-1 or A-2 by Standard & Poor's
("S&P"), Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), or
F-1 (+ or -) or F-2 (+ or -) by Fitch IBCA, Inc. ("Fitch") are all considered
rated in one of the two highest short-term rating categories. The Fund will
limit its investments in securities rated in the second highest short-term
rating category (e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+ or -) by Fitch)
to not more than 5% of its total assets, with not more than 1% invested in the
securities of any one issuer. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated as
being in one of the two highest short-term rating categories; currently, such
securities must be rated by two NRSROs in one of their two highest rating
categories. See "Regulatory Compliance."

U.S. GOVERNMENT OBLIGATIONS

The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or guaranteed
by U.S. government agencies or instrumentalities. These securities are
backed by:

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
brokers/dealers, banks, or other institutional borrowers of securities. The
collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

REPURCHASE AGREEMENTS

REVERSE REPURCHASE AGREEMENTS

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
maintained until the transaction is settled.

CREDIT ENHANCEMENT

The Fund typically evaluates the credit quality and ratings of credit-enhanced
securities based upon the financial condition and ratings of the party providing
the credit enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by the
credit enhancer for diversification purposes, unless the Fund has invested more
than 10% of its assets in securities issued, guaranteed or otherwise credit
enhanced by the credit enhancer, in which case the securities will be treated as
having been issued by both the issuer and the credit enhancer.

RESTRICTED AND ILLIQUID SECURITIES

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25% or
more of its total assets would be invested in securities of companies engaged
principally in any one industry other than finance companies. However, the Fund
may at any time invest 25% or more of its total assets in cash or cash items and
securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from purchasing
or holding money market instruments, corporate or U.S. government bonds,
debentures, notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objective and policies or the
Trust's Declaration of Trust.

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 10% of its net assets in illiquid securities
including repurchase agreements providing for settlement more than seven days
after notice and certain restricted securities not determined to be liquid under
criteria established by the Trustees.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

REGULATORY COMPLIANCE

The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the diversification and other requirements of Rule 2a-7, which regulates
money market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: United of Omaha Life Insurance Co., Omaha,
NE, owned approximately 26,230,260 shares (36.07%); Aetna Retirement Services,
Hartford, CT, owned approximately 11,870,401 shares (16.32%); First Variable
Life Cash Management, Kansas City, MO, owned approximately 10,297,811 shares
(14.16%); Valley Forge Life Insurance Co., Wethersfield, CT, owned approximately
6,610,532 shares (9.09%); Glenbrook Life and Annuity Co., Palatine, IL, owned
approximately 6,112,809 shares (8.41%); Kansas City Life Insurance Co., Kansas
City, MO, owned approximately 4,666,097 shares (6.42%); and Providian Life &
Health Insurance Co., Louisville, KY, owned approximately 3,759,827 shares
(5.17%).

TRUSTEE COMPENSATION

AGGREGATE

NAME, COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID

TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and

Chairman and Trustee 56 other investment companies
in the Fund Complex

Thomas G. Bigley $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

John T. Conroy, Jr. $197.06 $122,362 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Nicholas P. Constantakis++ $0 $0 for the Trust and

Trustee 34 other investment companies
in the Fund Complex

William J. Copeland $197.06 $122,362 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

J. Christopher Donahue $0 $0 for the Trust and

President and Trustee 18 other investment companies
in the Fund Complex

James E. Dowd $179.13 $122,362 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Lawrence D. Ellis, M.D. $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Edward L. Flaherty, Jr. $197.06 $122,362 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Peter E. Madden $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

John E. Murray, Jr. $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Wesley W. Posvar $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

Marjorie P. Smuts $179.13 $111,222 for the Trust and

Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

++ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not receive any fees as of the fiscal year end of the Trust.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal years ended December 31, 1997, 1996, and 1995, the adviser earned
advisory fees of $306,771, $154,455, and $40,601, respectively, of which
$123,674, $154,455, and $40,601, respectively, were voluntarily waived.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal years
ended December 31, 1997, 1996, and 1995, the Fund paid no brokerage commissions
on brokerage transactions.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. For purposes of this Statement of
Additional Information, Federated Services Company and Federated Administrative
Services may hereinafter collectively be referred to as the "Administrators."
For the fiscal years ended December 31, 1997, 1996, and 1995, the Administrators
earned $125,002, $125,000, and $125,000, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

SHAREHOLDER SERVICES

The Shareholder Services Agreement was not in effect in the Fund's fiscal year
ended December 31, 1997.

DETERMINING NET ASSET VALUE

The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.

USE OF THE AMORTIZED COST METHOD

The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.

The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the SEC under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the Fund's
investment objective. Under the Rule, the Fund is permitted to purchase
instruments which are subject to demand features or standby commitments. As
defined by the Rule, a demand feature entitles the Fund to receive the principal
amount of the instrument from the issuer or a third party on (1) no more than 30
days' notice or (2) at specified intervals not exceeding 397 calendar days on no
more than 30 days' notice. A standby commitment entitles the Fund to achieve
same-day settlement and to receive an exercise price equal to the amortized cost
of the underlying instrument plus accrued interest at the time of exercise.

MONITORING PROCEDURES

The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5% between the two
values. The Trustees will take any steps they consider appropriate (such as
redemption in kind or shortening the average portfolio maturity) to minimize any
material dilution or other unfair results arising from differences between the
two methods of determining net asset value.

INVESTMENT RESTRICTIONS

The Rule requires that the Fund limit its investments to instruments that, in
the opinion of the Trustees, present minimal credit risks and have received the
requisite rating from one or more NRSROs. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule also
requires the Fund to maintain a dollar-weighted average portfolio maturity (not
more than 90 days) appropriate to the objective of maintaining a stable net
asset value of $1.00 per share. In addition, no instrument with a remaining
maturity of more than thirteen months can be purchased by the Fund.

Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon as
possible.

The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.

In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.

In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.

MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

THE FUND'S TAX STATUS

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and * distribute to
its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

The Fund's average annual total returns for the one-year period ended December
31, 1997, and for the period from November 18, 1994 (date of initial public
investment) to December 31, 1997, were 4.93% and 4.95%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's yield for the seven-day period ended December 31, 1997 was 5.10%.

The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:

* determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares;
* dividing the net change in the account's value by the value of the account
at the beginning of the base period to determine the base period return;
and
* multiplying the base period return by 365/7.

EFFECTIVE YIELD

The Fund's effective yield for the seven-day period ended December 31, 1997 was
5.23%.

The Fund's effective yield is computed by compounding the unannualized base
period return by:

* adding 1 to the base period return; * raising the sum to the 365/7th power;
and * subtracting 1 from the result.

Effective yield does not reflect the charges and expense of a variable annuity
contract. You should review the performance figures for your insurance contract,
which figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of a Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.

ABOUT FEDERATED INVESTORS

In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1997, Federated managed more than $63.1 billion in assets across 51 money market
funds, including 18 government, 11 prime, and 22 municipal with assets
approximating $35 billion, $17.1 billion, and $10.9 billion, respectively.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated Investors' service to financial professionals
and institutions has earned it high ratings in several surveys performed by
DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

* Source: Investment Company Institute

Federated International Equity Fund II

(A Portfolio of Federated Insurance Series)

PROSPECTUS

This prospectus offers shares of Federated International Equity Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end management investment company. The Fund's
investment objective is to obtain a total return on its assets. Shares of the
Fund may be sold only to separate accounts of insurance companies to serve as
the investment medium for variable life insurance policies and variable annuity
contracts issued by the insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable life insurance policies and variable
annuity contracts offered by insurance companies which provide for investment in
the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 23,
1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A FUNDING VEHICLE FOR LIFE
INSURANCE COMPANIES WRITING VARIABLE LIFE INSURANCE POLICIES AND VARIABLE
ANNUITY CONTRACTS. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUSES
FOR SUCH CONTRACTS.

Prospectus dated April 23, 1998

TABLE OF CONTENTS

Financial Highlights 1
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Limitations 7
Net Asset Value 8
Investing in the Fund 8
Purchases and Redemptions 8
What Shares Cost 8
Dividends 8
Fund Information 9
Management of the Fund 9
Distribution of Fund Shares 9
Administration of the Fund 10
Brokerage Transactions 10
Shareholder Information 10
Voting Rights 10
Tax Information 11
Federal Income Tax 11
State and Local Taxes 11
Performance Information 11

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.16 $10.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07 0.11** 0.07
Net realized and unrealized gain on investments and foreign currency 1.05 0.75 0.28
Total from investment operations 1.12 0.86 0.35
LESS DISTRIBUTIONS
Distributions from net investment income (0.01) (0.05) --
NET ASSET VALUE, END OF PERIOD $12.27 $11.16 $10.35
TOTAL RETURN(B) 10.08% 8.32% 3.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.23% 1.25% 1.22%*
Net investment income 0.76% 0.89% 1.63%*
Expense waiver/reimbursement(c) 0.98% 3.05% 11.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $36,575 $17,752 $4,760
Average commission rate paid(d) $0.0068 $0.0030 --
Portfolio turnover 179% 103% 34%
</TABLE>
* Computed on an annualized basis.

** Per share information presented is based upon the monthly average number of
shares outstanding.

(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to December 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED DECEMBER 31, 1997, WHICH CAN BE OBTAINED FREE OF
CHARGE.

GENERAL INFORMATION

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The Fund's investment objective is to obtain a total return on its assets. The
investment objective cannot be changed without the approval of the Fund's
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it attempts to do so by following the investment policies
described in this prospectus.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Fund will attempt to achieve its objective by investing at least 65% of its
assets (and under normal market conditions substantially all of its assets) in
equity securities of issuers located in at least three different countries
outside of the United States. The Fund's investment approach is based on the
premise that investing in such non-U.S. securities provides three potential
benefits over investing solely in U.S. securities: (1) the opportunity to invest
in foreign issuers believed to have superior growth potential; (2) the
opportunity to invest in foreign countries with economic policies or business
cycles different from those of the U.S.; and (3) the opportunity to reduce
portfolio volatility to the extent that securities markets inside and outside
the U.S. do not move in harmony. The Fund may purchase sponsored or unsponsored
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and
European Depositary Receipts ("EDRs"); corporate and government fixed income
securities of issuers outside of the U.S.; convertible securities; and options
and financial futures contracts. In addition, the Fund may enter into forward
commitments, repurchase agreements, and foreign currency transactions; and
maintain reserves in foreign or U.S. money market instruments.

Unless otherwise indicated, the investment policies may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change to these policies becomes effective.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

DEPOSITARY RECEIPTS

The Fund may purchase sponsored or unsponsored ADRs, GDRs, and EDRs
(collectively, "Depositary Receipts"). ADRs are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs are typically issued
by foreign banks or trust companies, although they also may be issued by U.S.
banks or trust companies, and evidence ownership of underlying securities issued
by either a foreign or a U.S. corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary Receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Ownership of unsponsored Depositary Receipts may not entitle the Fund to
financial or other reports from the issuer of the underlying security, to which
it would be entitled as the owner of sponsored Depositary Receipts.

FIXED INCOME SECURITIES

At the date of this prospectus, the Fund has committed its assets primarily to
dividend-paying equity securities of established companies that appear to have
growth potential. However, as a temporary defensive position, the Fund may shift
its emphasis to fixed income securities, warrants, or other obligations of
foreign companies or governments, if they appear to offer potential higher
return. Fixed income securities include preferred stock, bonds, notes, or other
debt securities which are investment grade or higher, as described below. The
prices of fixed income securities fluctuate inversely to the direction of
interest rates.

The debt securities in which the Fund will invest will possess a minimum credit
rating of BBB as assigned by Standard & Poor's ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's"), or, if unrated, will be judged by the
Fund's adviser to be of comparable quality. Because the average quality of these
securities should remain constantly between AAA and BBB, the Fund may avoid the
adverse consequences that may arise for some debt securities in difficult
economic circumstances. Downgraded securities will be evaluated on a case by
case basis by the adviser. The adviser will determine whether or not the
security continues to be an acceptable investment. If not, the security will be
sold. A description of the ratings categories is contained in the Appendix to
the Statement of Additional Information.

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as
DECS-(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock
when issued as a debt security), LYONS-(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS-(Preferred Equity Redemption Cumulative Stock, an
equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES-(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

REAL ESTATE INVESTMENT TRUSTS

OPTIONS AND FINANCIAL FUTURES CONTRACTS

The Fund may purchase put and call options, financial futures contracts, and
options on financial futures contracts. In addition, the Fund may write (sell)
put and call options with respect to securities in the Fund's portfolio.

FORWARD COMMITMENTS

Forward commitments are contracts to purchase securities for a fixed price at a
date beyond customary settlement time. The Fund may enter into these contracts
if liquid securities in amounts sufficient to meet the purchase price are
segregated on the Fund's records at the trade date and maintained until the
transaction has been settled. Risk is involved if the value of the security
declines before settlement. Although the Fund enters into forward commitments
with the intention of acquiring the security, it may dispose of the commitment
prior to settlement and realize a short-term profit or loss.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities.

MONEY MARKET INSTRUMENTS

The Fund may invest in foreign and U.S. money market instruments, including
interest-bearing call deposits with banks, government obligations, certificates
of deposit, banker's acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The commercial paper in which the Fund
invests will be rated A-1 by S&P or P-1 by Moody's. These investments may be
used to temporarily invest cash received from the sale of Fund shares, to
establish and maintain reserves for temporary defensive purposes, or to take
advantage of market opportunities. Investments in the World Bank, Asian
Development Bank, or Inter-American Development Bank are not anticipated.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restriction on resale under federal securities
law. Under criteria established by the Trustees, certain restricted securities
are determined to be liquid. To the extent restricted securities are not
determined to be liquid, the Fund will limit their purchase together with other
illiquid securities including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after notice,
over-the-counter options to 15% of its net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or long-term basis, or both, to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral at all times equal to at least 100% of the value of the
securities loaned.

FOREIGN CURRENCY TRANSACTIONS

The Fund will enter into foreign currency transactions to obtain the necessary
currencies to settle securities transactions. Currency transactions may be
conducted either on a spot or cash basis at prevailing rates or through forward
foreign currency exchange contracts.

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES

A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell an amount of a particular currency at a specific
price and on a future date agreed upon by the parties.

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will not enter into
a forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24 hours and
30 days, depending upon local custom.

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the adviser
will consider the likelihood of changes in currency values when making
investment decisions, the adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency. No more than 30% of the Fund's assets will be committed to
forward contracts for hedging purposes at any time. (This restriction does not
include forward contracts entered into to settle securities transactions.)

The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Fund are traded
on U.S. and foreign exchanges or over-the-counter.

RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FINANCIAL
FUTURES CONTRACTS

When the Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may not
correlate with the prices of the securities in the Fund's portfolio. This may
cause the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Fund's adviser could be
incorrect in its expectations about the direction or extent of market factors
such as interest or currency exchange rate movements. In these events, the Fund
may lose money on the futures contract or option. Also, it is not certain that a
secondary market for positions in futures contracts or for options will exist at
all times. Although the Fund's adviser will consider liquidity before entering
into such transactions, there is no assurance that a liquid secondary market on
an exchange or otherwise will exist for any particular futures contract or
option at any particular time. The Fund's ability to establish and close out
futures and options positions depends on this secondary market.

RISKS ASSOCIATED WITH NON-U.S. SECURITIES

The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. These investments,
however, carry considerably more volatility and risk because they are associated
with less mature economies and less stable political systems.

CURRENCY RISKS

Because the Fund may purchase securities denominated in currencies other than
the U.S. dollar, changes in foreign currency exchange rates could affect the
Fund's net asset value; the value of interest earned; gains and losses realized
on the sale of securities; and net investment income and capital gain, if any,
to be distributed to shareholders by the Fund. If the value of a foreign
currency rises against the U.S. dollar, the value of the Fund assets denominated
in that currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. dollar, the value of Fund assets denominated
in that currency will decrease.

The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental interpretation, speculation and
other economic and political conditions. Although the Fund values its assets
daily in U.S. dollars, the Fund will not convert its holdings of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.

FOREIGN COMPANIES

Other differences between investing in non-U.S. and U.S. securities include:

* less publicly available information about foreign companies; * the lack of
uniform financial accounting standards applicable to
foreign companies;
* less readily available market quotations on foreign companies; *
differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
* differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments; * generally lower
foreign stock market volume; * the likelihood that foreign securities may be
less liquid or more
volatile;
* foreign brokerage commissions may be higher;
* unreliable mail service between countries; and
* political or financial changes which adversely affect investments in some
countries.

U.S. GOVERNMENT POLICIES

In the past, U.S. government policies have discouraged or restricted certain
investments abroad by investors such as the Fund. Investors are advised that
when such policies are instituted, the Fund will abide by them.

SHORT SALES

The Fund intends to sell securities short from time to time, subject to certain
restrictions. A short sale occurs when a borrowed security is sold in
anticipation of a decline in its price. If the decline occurs, shares equal in
number to those sold short can be purchased at the lower price. If the price
increases, the higher price must be paid. The purchased shares are then returned
to the original lender. Risk arises because no loss limit can be placed on the
transaction. When the Fund enters into a short sale, assets equal to the market
price of the securities sold short or any lesser price at which the Fund can
obtain such securities, are segregated on the Fund's records and maintained
until the Fund meets its obligations under the short sale.

DEVELOPING/EMERGING MARKETS

The economies of individual emerging countries may differ favorably from the
U.S. economy in such respects as growth of gross domestic product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments position. Further, the economies of
developing countries generally are heavily dependent on international trade and,
accordingly, have been, and may continue to be, adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade. These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they trade.

Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain debt securities and domestic companies may be subject to
limitation in other emerging countries. Foreign ownership limitations also may
be imposed by the charters of individual companies in emerging countries to
prevent, among other concerns, violation of foreign investment limitations.

Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some emerging
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental registration or approval for such repatriation.
Any investment subject to such repatriation controls will be considered illiquid
if it appears reasonably likely that this process will take more than seven
days.

With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.

INVESTMENT LIMITATIONS

The Fund will not:

* with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities (other than securities
issued or guaranteed by the government of the U.S. or its agencies or
instrumentalities) of any one issuer, or acquire more than 10% of the
outstanding voting securities of any one issuer;
* sell securities short except under strict limitations; * borrow money or
pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets
and pledge its assets to secure such borrowings; or
* permit margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts,
to exceed 5% of the fair market value of the Fund's total assets, after
taking into account the unrealized profits and losses on the contracts.

The Fund will not:

* invest more than 15% of the value of its net assets in illiquid securities,
including securities not determined by the Trustees to be liquid,
repurchase agreements with maturities longer than seven days after notice,
and certain over-the-counter options; or
* purchase put options on securities unless the securities or an offsetting
call option is held in the Fund's portfolio.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regu- lations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

PORTFOLIO TURNOVER

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 200%.
A portfolio turnover rate of 100% would occur, for example, if all the
securities in the Fund's portfolio were replaced once in a period of one year.
The Fund's rate of portfolio turnover may exceed that of certain other mutual
funds with the same investment objective. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other considerations when the Fund's investment adviser deems it
appropriate to make changes in the Fund's portfolio.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable life insurance policies and variable
annuity contracts. The use of Fund shares as investments for both variable life
insurance policies and variable annuity contracts is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations,
resulting from mixed funding or shared funding, the Trustees of the Fund will
closely monitor the operation of mixed funding and shared funding and will
consider appropriate action to avoid material conflicts and take appropriate
action in response to any material conflicts which occur. Such action could
result in one or more participating insurance companies withdrawing their
investment in the Fund.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New Year's
Day, Martin Luther King Jr., Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Global Research Corp., the Fund's investment
adviser, subject to direction by the Trustees. The adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

ADVISORY FEES

The Fund's adviser receives an annual investment advisory fee equal to 1.00% of
the Fund's average daily net assets. The adviser may voluntarily choose to waive
a portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses at any
time at its sole discretion.

ADVISER'S BACKGROUND

Federated Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Prior to September 1995, Federated Global Research Corp.
had not served as an investment adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more than
300 funds under management and/or administration by its subsidiaries, as of
December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through approximately 4,000
financial institutions nationwide.

Drew J. Collins has been a portfolio manager of the Fund since November
1995. Mr. Collins joined Federated Investors in 1995 as a Senior Vice
President of the Fund's investment adviser. Mr. Collins served as Vice
President/Portfolio Manager of international equity portfolios at Arnhold
and Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College
Retirement Equities Fund from 1986 to 1994. Mr. Collins is a Chartered
Financial Analyst and received his M.B.A. in finance from the Wharton School
of The University of Pennsylvania.

Henry A. Frantzen has been a portfolio manager of the Fund since November
1995. Mr. Frantzen joined Federated Investors in 1995 as an Executive Vice
President of the Fund's investment adviser. Mr. Frantzen served as Chief
Investment Officer of international equities at Brown Brothers Harriman &
Co. from 1992 until 1995.

DISTRIBUTION OF FUND SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp., from its own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance may be predicated upon the
amount of shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of April 8, 1998, Aetna Retirement Services Central Valuation Unit,
Hartford, CT, owned approximately 91.96% of the voting securities of the Fund,
and therefore, may for certain purposes be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders. Aetna Retirement Services Central Valuation Unit is owned by Aetna
Inc.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because the Fund expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is calculated
by dividing the net investment income per share (as defined by the Securities
and Exchange Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

NOTES

[Graphic]

Federated Investors

Federated International Equity Fund II
(A Portfolio of Federated Insurance Series)

PROSPECTUS

APRIL 23, 1998

A Diversified Portfolio of Federated Insurance Series, an Open-End
Management Investment Company

FEDERATED
INSURANCE
SERIES
FEDERATED INTERNATIONAL EQUITY FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Global Research Corp.
175 Water Street
New York, NY 10038-4965

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor

1-800-341-7400

www.federatedinvestors.com

Cusip 313916603
G01078-01 (4/98)
[Graphic]

FEDERATED INTERNATIONAL EQUITY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated International Equity Fund II (the "Fund"), a portfolio of Federated
Insurance Series (the "Trust") dated April 23, 1998. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

Federated Investors
Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federtaedinvestors.com

Cusip 313916603
G01078-02 (4/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
Convertible Securities 1
Futures and Options Transactions 1
Foreign Currency Hedging Transactions 4
Warrants 4
Repurchase Agreements 5
Reverse Repurchase Agreements 5
When-Issued and Delayed Delivery Transactions 5
Lending of Portfolio Securities 5
Investing in Securities of Other Investment Companies 5
Restricted and Illiquid Securities 5
Risks 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 6
Diversification of Investments 6
Acquiring Securities 6
Concentration of Investments 6
Borrowing 6
Pledging Assets 7
Buying on Margin 7
Issuing Senior Securities 7
Underwriting 7
Investing in Real Estate 7
Investing in Commodities 7
Lending Cash or Securities 7
Selling Short 7
Purchasing Securities to Exercise Control 7
Investing in Restricted and Illiquid Securities 7
Dealing in Puts and Calls 8
FEDERATED INSURANCE SERIES MANAGEMENT 8
Fund Ownership 12
Trustee Compensation 13
Trustee Liability 13
INVESTMENT ADVISORY SERVICES 13
Adviser to the Fund 13
Advisory Fees 14
BROKERAGE TRANSACTIONS 14
OTHER SERVICES 14
Fund Administration 14
Custodian and Portfolio Accountant 14
Transfer Agent 14
Independent Auditors 15
PURCHASING SHARES 15
SHAREHOLDER SERVICES 15
DETERMINING NET ASSET VALUE 15
Determining Market Value of Securities 15
Trading in Foreign Securities 15
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 16
The Fund's Tax Status 16
Foreign Taxes 16
Shareholders' Tax Status 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
Economic and Market Information 18
ABOUT FEDERATED INVESTORS 18
Mutual Fund Market 18
Institutional Clients 18
Bank Marketing 19
Broker/Dealers and Broker/Dealer Subsidiaries 19
FINANCIAL STATEMENTS 19
APPENDIX 20

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the Board
of Trustees (the "Trustees") held on November 14, 1995, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Trust from
Insurance Management Series to Federated Insurance Series. At a meeting of the
Trustees held on February 26, 1996, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Fund from International Stock
Fund to Federated International Equity Fund II. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest in separate
portfolios of securities, including the Fund. The shares in any one portfolio
may be offered in separate classes. As of the date of this Statement, the
Trustees have not established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to obtain a total return on its assets.

TYPES OF INVESTMENTS

The Fund invests in a diversified portfolio of equity securities issued by
non-U.S. issuers. The Fund will invest at least 65%, and under normal market
conditions, substantially all of its total assets, in equity securities of
issuers located in at least three different countries outside of the United
States. The Fund may also purchase sponsored or unsponsored American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary
Receipts ("EDRs"); purchase investment grade corporate and government fixed
income securities of issuers outside the U.S.; enter into forward commitments,
repurchase agreements, and foreign currency transactions; and maintain reserves
in foreign or U.S. money market instruments.

CONVERTIBLE SECURITIES

FUTURES AND OPTIONS TRANSACTIONS

As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by buying
and selling futures contracts and options on futures contracts, and buying put
and call options on portfolio securities and securities indices. The Fund may
also write covered put and call options on portfolio securities to attempt to
increase its current income or to hedge a portion of its portfolio investments.
The Fund will maintain its positions in securities, option rights, and
segregated cash subject to puts and calls until the options are exercised,
closed, or have expired. An option position on a futures contract may be closed
out over-the-counter or on a nationally recognized exchange which provides a
secondary market for options of the same series. The Fund will not engage in
futures transactions for speculative purposes.

FUTURES CONTRACTS

The Fund may purchase and sell financial futures contracts to hedge against the
effects of changes in the value of portfolio securities due to anticipated
changes in interest rates and market conditions without necessarily buying or
selling the securities. Although some financial futures contracts call for
making or taking delivery of the underlying securities, in most cases these
obligations are closed out before the settlement date. The closing of a
contractual obligation is accomplished by purchasing or selling an identical
offsetting futures contract. Other financial futures contracts by their terms
call for cash settlements.

The Fund also may purchase and sell stock index futures contracts with respect
to any stock index traded on a recognized stock exchange or board of trade to
hedge against changes in prices. Stock index futures contracts are based on
indices that reflect the market value of common stock of the firms included in
the indices. An index futures contract is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. No physical delivery of the underlying securities in the index is made.
Instead, settlement in cash must occur upon the termination of the contract,
with the settlement being the difference between the contract price and the
actual level of the stock index at the expiration of the contract.

A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. For example, in the fixed income
securities market, prices move inversely to interest rates. A rise in rates
means a drop in price. Conversely, a drop in rates means a rise in price. In
order to hedge its holdings of fixed income securities against a rise in market
interest rates, the Fund could enter into contracts to deliver securities at a
predetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge against a decline in
market interest rates.

"MARGIN" IN FUTURES TRANSACTIONS

Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash, U.S. government
securities or highly-liquid debt securities with its custodian (or the broker,
if legally permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial margin
in futures transactions does not involve the borrowing of funds by the Fund to
finance the transactions. Initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied.

A futures contract held by the Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Fund pays or receives
cash, called "variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation margin
does not represent a borrowing or loan by the Fund but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the Fund will
mark to market its open futures positions. The Fund is also required to deposit
and maintain margin when it writes call options on futures contracts.

To the extent required to comply with Commodity Futures Trading Commission
("CFTC") Regulation 4.5 and thereby avoid status as a "commodity pool operator,"
the Fund will not enter into a futures contract, or purchase an option thereon,
if immediately thereafter the initial margin deposits for futures contracts held
by it, plus premiums paid by it for open options on futures contracts, would
exceed 5% of the market value of the Fund's total assets, after taking into
account the unrealized profits and losses on those contracts it has entered
into; and, provided further, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in computing
such 5%. Second, the Fund will not enter into these contracts for speculative
purposes; rather, these transactions are entered into only for bona fide hedging
purposes, or other permissible purposes pursuant to regulations promulgated by
the CFTC. Third, since the Fund does not constitute a commodity pool, it will
not market itself as such, nor serve as a vehicle for trading in the commodities
futures or commodity options markets. Finally, because the Fund will submit to
the CFTC special calls for information, the Fund will not register as a
commodities pool operator.

PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS

The Fund may purchase listed put options on financial and stock index futures
contracts to protect portfolio securities against decreases in value resulting
from market factors, such as an anticipated increase in interest rates or stock
prices. Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contracts entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price.

Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.

Alternatively, the Fund may exercise its put option to close out the position.
To do so, it would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in return
for payment of the strike price. If the Fund neither closes out nor exercises an
option, the option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.

When the Fund sells a put on a futures contract, it receives a cash premium in
exchange for granting to the purchaser of the put the right to receive from the
Fund, at the strike price, a short position in such futures contract, even
though the strike price upon exercise of the option is greater than the value of
the futures position received by such holder. If the value of the underlying
futures position is not such that exercise of the option would be profitable to
the option holder, the option will generally expire without being exercised. It
will generally be the policy of the Fund, in order to avoid the exercise of an
option sold by it, to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless it is determined to be in the
Fund's interest to deliver the underlying futures position. A closing purchase
transaction consists of the purchase by the Fund of an option having the same
term as the option sold by the Fund, and has the effect of canceling the Fund's
position as a seller. The premium which the Fund will pay in executing a closing
purchase transaction may be higher than the premium received when the option was
sold, depending in large part upon the relative price of the underlying futures
position at the time of each transaction.

CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS

In addition to purchasing put options on futures, the Fund may write listed and
over-the-counter call options on financial and stock index futures contracts to
hedge its portfolio. When the Fund writes a call option on a futures contract,
it is undertaking the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As stock prices fall or market interest rates
rise, causing the prices of futures to go down, the Fund's obligation under a
call option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the Fund's call option position to increase.

In other words, as the underlying futures price falls below the strike price,
the buyer of the option has no reason to exercise the call, so that the Fund
keeps the premium received for the option. This premium can substantially offset
the drop in value of the Fund's portfolio securities.

The Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES

The Fund may purchase put options on portfolio securities and stock indices to
protect against price movements in the Fund's portfolio securities. A put option
gives the Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of the
option.

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES

The Fund may also write covered call options to generate income and thereby
protect against price movements in the Fund's portfolio securities. As writer of
a call option, the Fund has the obligation upon exercise of the option during
the option period to deliver the underlying security upon payment of the
exercise price or, in the case of a securities index, a cash payment equal to
the difference between the closing price of the index and the exercise price of
the option. The Fund may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any additional
consideration).

FOREIGN CURRENCY HEDGING TRANSACTIONS

In order to hedge against foreign currency exchange rate risks, the Fund may
enter into forward foreign currency exchange contracts and foreign currency
futures contracts, as well as purchase put or call options on foreign
currencies, as described below. The Fund may also conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.

The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. The Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when the Fund believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward contract to buy that foreign currency for a fixed
dollar amount. This second investment practice is generally referred to as
"cross-hedging." Because in connection with the Fund's forward foreign currency
transactions an amount of the Fund's assets equal to the amount of the purchase
will be held aside or segregated to be used to pay for the commitment, the Fund
will always have cash, cash equivalents or high quality debt securities
available sufficient to cover any commitments under these contracts or to limit
any potential risk. The segregated account will be marked to market on a daily
basis. While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event,
the Fund's ability to utilize forward contracts in the manner set forth above
may be restricted. Forward contracts may limit potential gain from a positive
change in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for the Fund than if it had not engaged in such contracts.

The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates, although,
in the event of rate movements adverse to the Fund's position, the Fund may
forfeit the entire amount of the premium plus related transaction costs. Options
on foreign currencies to be written or purchased by the Fund will be traded on
U.S. and foreign exchanges or over-the-counter.

The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the adviser to forecast
currency exchange rate movements correctly. Should exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of foreign
currency futures or may realize losses.

WARRANTS

The Fund may invest in warrants. Warrants are basically options to purchase
common stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or may be
perpetual. However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not exceed
the warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.

REPURCHASE AGREEMENTS

REVERSE REPURCHASE AGREEMENTS

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

RESTRICTED AND ILLIQUID SECURITIES

The Trustees consider the following criteria in determining the liquidity of
certain restricted securities:

RISKS

When the Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities or foreign currency subject to the
futures contracts may not correlate perfectly with the prices of the securities
or currency in the Fund's portfolio. This may cause the futures contract and any
related options to react differently to market changes than the portfolio
securities or foreign currency. In addition, the adviser could be incorrect in
its expectations about the direction or extent of market factors such as stock
price movements or foreign currency exchange rate fluctuations. In these events,
the Fund may lose money on the futures contract or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market. The inability to close out these positions could have an
adverse effect on the Fund's ability to effectively hedge its portfolio.

To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for related
options would exceed 5% of the value of the Fund's total assets after taking
into account the unrealized profits and losses on those contracts it has entered
into; and, provided further, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in computing
such 5%. When the Fund purchases futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures contracts
(less any related margin deposits), will be deposited in a segregated account
with the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the use of such futures contract is
unleveraged. When the Fund sells futures contracts, it will either own or have
the right to receive the underlying future or security, or will make deposits to
collateralize the position as discussed above.

PORTFOLIO TURNOVER

The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. Portfolio securities will be sold when the
adviser believes it is appropriate, regardless of how long those securities have
been held. Any such trading will increase the Fund's portfolio turnover rate and
transaction costs. The adviser to the Fund does not anticipate that portfolio
turnover will result in adverse tax consequences. For the fiscal years ended
December 31, 1997 and 1996, the portfolio turnover rates for the Fund were 179%
and 103%, respectively.

INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of the value of its total assets, the Fund will not purchase
securities of any one issuer (other than securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities) if as a
result more than 5% of the value of its total assets would be invested in the
securities of that issuer, or if it would own more than 10% of the outstanding
voting securities of any one issuer.

ACQUIRING SECURITIES

The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer.

CONCENTRATION OF INVESTMENTS

The Fund will not invest 25% or more of its total assets in securities of
issuers having their principal business activities in the same industry.

BORROWING

The Fund will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts up to one-third of the value of
its total assets, including the amount borrowed. This borrowing provision is not
for investment leverage but solely to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
securities would be inconvenient or disadvantageous. The Fund will not purchase
securities while outstanding borrowings exceed 5% of the value of its total
assets.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate assets, except when necessary
for permissible borrowings. Neither the deposit of underlying securities or
other assets in escrow in connection with the writing of put or call options or
the purchase of securities on a when-issued basis, nor margin deposits for the
purchase and sale of financial futures contracts and related options are deemed
to be a pledge.

BUYING ON MARGIN

The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions, except that
the Fund may make margin payments in connection with its use of financial
futures contracts or related options and transactions.

ISSUING SENIOR SECURITIES

The Fund will not issue senior securities except in connection with borrowing
money directly or through reverse repurchase agreements or as required by
forward commitments to purchase securities or currencies.

UNDERWRITING

The Fund will not underwrite or participate in the marketing of securities of
other issuers, except as it may be deemed to be an underwriter under federal
securities law in connection with the disposition of its portfolio securities.

INVESTING IN REAL ESTATE

The Fund will not invest in real estate, although it may invest in securities
secured by real estate or interests in real estate or issued by companies,
including real estate investment trusts, which invest in real estate or
interests therein.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities or commodity contracts, except
that the Fund may purchase and sell financial futures contracts and options on
financial futures contracts, provided that the sum of its initial margin
deposits for financial futures contracts held by the Fund, plus premiums paid by
it for open options on financial futures contracts, may not exceed 5% of the
fair market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts. Further, the Fund may engage
in foreign currency transactions and purchase or sell forward contracts with
respect to foreign currencies and related options.

LENDING CASH OR SECURITIES

The Fund will not lend any assets except portfolio securities. This shall not
prevent the purchase or holding of bonds, debentures, notes, certificates of
indebtedness, or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objective and
policies or its Declaration of Trust.

SELLING SHORT

The Fund will not sell securities short unless (1) it owns, or has a right to
acquire, an equal amount of such securities, or (2) it has segregated an amount
of its other assets equal to the lesser of the market value of the securities
sold short or the amount required to acquire such securities. The segregated
amount will not exceed 10% of the Fund's net assets. While in a short position,
the Fund will retain the securities, rights, or segregated assets.

Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.

PURCHASING SECURITIES TO EXERCISE CONTROL

The Fund will not purchase securities of a company for the purpose of exercising
control or management.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with maturities longer than
seven days after notice, and certain over-the-counter options and certain
restricted securities not determined to be liquid under criteria established by
the Trustees.

DEALING IN PUTS AND CALLS

The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or the Fund is entitled to them in deliverable form
without further payment or the Fund has segregated cash in the amount of any
further payments. The Fund will not purchase put options on securities unless
the securities or an offsetting call option is held in the Fund's portfolio. The
Fund may also purchase, hold or sell (i) contracts for future delivery of
securities or currencies and (ii) warrants granted by the issuer of the
underlying securities.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.

The Fund has no present intent to borrow money or pledge securities in excess of
5% of the value of its total assets in the coming fiscal year.

For purposes of their policies and limitations, the Funds consider certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA

Birthdate: September 3, 1939

Trustee

Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.1999; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Obligations Trust II; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of April 8, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: SAFECO Mutual Funds/SAFECO Securities Inc.,
Seattle, WA, owned approximately 190,855 shares (6.26%); and Aetna Retirement
Services Central Valuation Unit, Hartford, CT, owned
approximately 2,801,888 shares (91.96%).

TRUSTEE COMPENSATION

AGGREGATE

NAME, COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID

TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0 $0 for the Trust and
Trustee 56 other investment companies
in the Fund Complex